US: The impact of the coronavirus on the labour market – UOB

Alvin Liew at UOB Group’s Global Economics & Markets Research assessed the latest US labour market report.

Key Quotes

“The coronavirus (COVID-19) pandemic and the measures implemented to contain its spread brought the US economy to its knees, and more importantly, inflicted extensive damage to the US labor market, not seen since the Great Depression era. April’s job losses amounted to a staggering 20.5 million, below the Bloomberg median forecast of 22 million job losses but it is 10 times higher than the previous record loss recorded in 1945!”.

“US unemployment rate more than tripled to 14.7% in April (from 4.4% in March) in line with the significant job losses, and the highest rate recorded since BLS data was available in January 1948. According to data from the National Bureau of Economic Research, this was the highest rate since the 1930’s Great Depression. That said, the unemployment rate spike was cushioned by the marked easing of the labor participation rate which tumbled by 2.5ppt to 60.2% (from 62.7% in March), lowest since January 1973 (60.0%). Otherwise, the spike in unemployment rate would have been worse.”

“The private sector was responsible the lion’s share of jobs losses with 19.52 million while the government lost 980,000 jobs, mainly due to school closures to contain COVID-19. Within the private sector, job declines were widespread and no industry was spared. It was heavily concentrated in services-providing industries (-17.17 million) while goods-producing lost 2.36 million jobs with all subclusters recording falling employment and heaviest loss was in manufacturing (-1.33 million) followed by construction (-0.98 million).”

“US wage growth surprisingly beat market expectations by a huge margin, rising by 4.7% m/m, 7.9% y/y in April from 0.5% m/m, 3.3% y/y in March but this is a magnified distortion due to the April wave of US job losses being concentrated in lower-paying employment, which in turn artificially pushed up wages despite the dismal job situation. A clear example would be the relatively lower job losses in financial activities (-262,000) and information (-254,000) industries, which pays higher wages on average versus the leisure & hospitality industry.”