By Eric Morath and Paul Kiernan
The March employment report will show a hit to the U.S. job
market due to the novel coronavirus pandemic, but it is unlikely to
show the depth of the crash because the data reflect the month's
first weeks.
Economists surveyed by The Wall Street Journal expect Friday's
report to show U.S. employers shed 56,000 jobs from payrolls --
snapping a record 113-month stretch of job creation -- and the
unemployment rate edged up to 3.7% from a 50-year low of 3.5% in
February.
Both predictions, from a survey of eight economists late last
week, are far less dire than the picture drawn by the record 3.3
million Americans who filed for unemployment benefits from March 15
through 21, after many government authorities ordered closures of
large swaths of the economy to stem the virus's spread.
That's because the March report, like nearly all such Labor
Department employment reports, is based on surveys asking about the
week or pay period that includes the 12th day of the month. A
survey of households that determines the unemployment rate asked
Americans if they reported to work during the week of March 8-14.
If respondents were paid for a single hour of work that week --
even if they were subsequently laid off -- they are counted as
employed.
As a result, the March jobs report will primarily reflect the
labor market in the first two weeks of the month, when the U.S. was
struggling to ramp up testing for the virus. That was before the
number of virus-related infections and deaths jumped and several
governors ordered nonessential businesses to close, forcing layoffs
of millions of Americans, including waiters, hotel staff, auto
workers and dental hygienists.
Friday's report is "not going to really capture the significant
damage out there that occurred," said Joseph Brusuelas, chief
economist at RSM US LLC. "Investors and policy makers should just
throw it out. It's just a remembrance of things past."
If the shutdowns continue for a few more weeks, the April jobs
report, scheduled for release May 8, could show the greatest
one-month deterioration of the labor market on record.
Friday's report "feels like it will be the foreshock to a bigger
earthquake coming in early May," said Nick Bunker, an economist at
job-search site Indeed.com.
Depending on how the pandemic evolves, the report released in
May could show unemployment soaring toward double digits and more
than one million jobs slashed. That would mark the largest
one-month drop in payrolls since Japan surrendered to the U.S. in
September 1945, prompting the country to wind down its wartime
efforts.
Future jobs reports could be even worse.
A general rule of thumb, Mr. Brusuelas said, is that the
unemployment rate rises by 1 percentage point for every 1.5 million
initial jobless claims. Given last week's record-shattering
unemployment claims, the jobless rate will likely approach at least
6% in April and exceed 10% by midsummer, Mr. Brusuelas said, adding
the numbers could keep climbing.
That's because a huge number of American workers are employed in
service industries that have been shuttered. Leisure and
hospitality -- a category comprising hotels, restaurants, arts and
entertainment -- employed 16.9 million Americans as of February,
Labor Department data show.
While millions of workers are working remotely now, just 34% of
American jobs can plausibly be performed at home, University of
Chicago economists Jonathan Dingel and Brent Nieman estimate.
"There is the chance we could see depression-like unemployment
numbers by the time we're through," Mr. Brusuelas said.
The Labor Department's survey of employers asks for their
establishment's head count for the payroll period that includes
March 12. If a worker was paid for any portion of that period, they
are counted as being on a payroll.
Erica Groshen, the former commissioner of the Bureau of Labor
Statistics, said underlying data in the report could give clues to
the virus's emerging impact. Watch for employment cuts in
temporary-help jobs and the number of hours worked. It's possible
wage growth could tick up, because the first wave of job cuts hit
lower-wage workers while better-paid employees were more likely to
be able to work remotely -- causing the average to rise.
The coming report is also subject to unusual statistical
distortions. Survey responses could be low if businesses have
closed. Statistical models that smooth seasonal patterns and
predict the pace at which business close and open could be rendered
worthless. And some of the people who lost their jobs may be
counted as out of the labor force, rather than unemployed, because
they are not actively seeking work at a time when the virus has
shut businesses and many are responsible for caring for children
out of school or ill family members.
Some economists are bracing for a darker report on Friday. Joel
Naroff, chief economist at Naroff Economic Advisors, forecasts the
data will show 1.25 million jobs were shed and the unemployment
rate jumped to 5.2%.
"I know I'm on the high side," he said. "But the jobless-claims
data tell me a lot more workers got laid off early in the month
than people realized." Mr. Naroff said business closures and
layoffs in hard-hit areas such as New York City occurred early
enough to get counted in this report.
Like many economists, he sees the March data as the tip of the
iceberg. He predicts the economy could shed upward of 10 million
jobs during the pandemic and the unemployment rate will top
14%.
Write to Eric Morath at eric.morath@wsj.com and Paul Kiernan at
paul.kiernan@wsj.com
(END) Dow Jones Newswires
March 29, 2020 10:14 ET (14:14 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.