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 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 Neiman 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%.
|For more news you can use to help guide your financial life, visit our Insights page.|