All good things come to an end and, after a record-breaking 113 consecutive months of job creation in the United States, it was confirmed that US employers shed jobs in March rather than creating them.
The monthly non-farm payroll figures, generally regarded as the single most important data release every month in financial markets, revealed that 701,000 US jobs were lost last month.
That was the worst monthly drop since March 2009 when the world was in the grip of the global financial crisis.
And the rise in the US jobless rate, from 3.5% to 4.4%, was the worst such increase since January 1975 – another month in which great swathes of the world economy were convulsing.
That there was a rise in unemployment came as no surprise given the coronavirus-inflicted slowdown in the world’s biggest economy.
Yet the extent to which jobs were shed during the month was still significantly worse than economists on Wall Street had been expecting. They had pencilled in a drop of just 100,000 jobs and an unemployment rate of 3.8% because the jobless figures tend to be a lagging indicator and on the basis that, for much of the month, shops, bars and restaurants in the US had remained open as usual.
The biggest contributor to the job losses was the leisure and hospitality sector, where 459,000 jobs were shed, mainly in restaurants and bars.
The US Labor Department, which compiles the figures, also reported that “notable declines also occurred in health care and social assistance, professional and business services, retail trade, and construction.”
Some 1.3 million Americans during the month did not work due to illness.
Looking at demographic groups, the biggest increase in job losses was among teenagers, where the unemployment rate jumped from 11% in February to 14.3% last month.
Among ethnic groups, the jobless rate among white Americans rose from 3.1% to 4% and among black and African Americans from 5.8% to 6.7%. Among Asian Americans, the jobless rate rose from 2.5% to 4.1%, while among Hispanic or Latino Americans the jobless rate rose from 4.4% to 6%.
Economists warned that, with 10 million Americans having registered as unemployed during the last two weeks, the figures were likely to get worse in coming months. Some states, such as Nevada and Georgia, have only in the last week ordered non-essential workers to stay at home.
Neil Williams, senior economic adviser to the international business of investment manager Federated Hermes, said: “At this pace, we could see a US unemployment rate of 13% by June [because] labour market data are traditionally a lagging indicator.”
Ronald Temple, head of US equity at fund manager Lazard Asset Management, added: “This is only the beginning of the record-setting increase in unemployment. The magnitude of the economic hit will depend in large part on the timing and scale of federal aid to small businesses, so they can keep employees on the payroll, and to households to mitigate the hit to consumption.
“Early indications are that the small business program is off to a bumpy start, while demand is overwhelming.”
Jan Hatzius, chief economist at investment bank Goldman Sachs, told CNBC that US unemployment could hit 15% in coming months.
Mr Hatzius, who is predicting a quarter-on-quarter drop of 34% on an annualised basis, said: “We think April is probably going to be the worst month and after April, there will be a small recovery, assuming the medical news improves and infection comes down.”
“By the end of the year we have the level of GDP at about 5% lower than the year earlier level.”
And Hinesh Patel, portfolio manager at wealth management firm Quilter Investors, added: “These unemployment numbers from the US are likely to be just the start. The depth of the global financial crisis saw 800,000 jobs lost in one month, so we are already not far off that number. What we have today is looking more like war-time numbers.”
Mr Patel said that many of the jobs lost thus far were likely to be low paid and among workers with low level of savings.
He said this ought to serve as a wake-up call to US politicians.
Mr Patel added: “The planned helicopter money isn’t going to cut it given the magnitude of the damage expected.
“Secondly, the drop in employment is considerably lower against expectations, showing the pace of economic weakness is going to be much sharper than expected.
“We are on the cusp of a global economic recession that increasingly looks like it could become a depression.”
Stock markets in both the US and in Europe fell after the numbers were released. Despite that, the S&P500 – America’s most important stock index – looked set to finish higher for a second consecutive week, unlike the Dow Jones Industrial Average and the Nasdaq. In Europe, the FTSE-100 finished lower for the seventh week in eight, while the DAX 30 in Germany and the CAC 40 in France also ended the week lower.
If there was a positive in the figures, it was that average earnings continued to rise, hitting an average $28.62 an hour – up from $28.51 in February and $27.76 in March last year.
That, however, may simply reflect the fact that some lower-paid Americans lost their jobs last month.