US jobs slump is just the tip of the iceberg

Azad Zangana

Azad Zangana

Senior European Economist and Strategist

See all articles

The US is expected to be about three to four weeks behind Europe in feeling the impact from the Covid-19 global pandemic. Therefore, when the US Bureau of Labor Statistics (BLS) today reported 701,000 non-farm job losses for the month of March it came as a severe shock. The figure is seven times greater than the Reuters consensus survey estimate.

Private sector job losses total 713,000, only slightly offset by 18,000 public sector jobs created, of which 17,000 are temporary for the 2020 census survey.

The fall in non-farm jobs is the worst recorded since March 2009 and abruptly ends the 113-month streak of positive gains. Data from the household survey showed a rise in the unemployment rate from 3.5% to 4.4%, taking it back to a rate not seen since August 2017. But what is more alarming is the size of the jump – the biggest monthly rise since January 1975.

Not only has the number of unemployed risen sharply, but so has the number of those that report being underemployed. The US measure of unemployment and underemployment rose from 7% to 8.7%.

Social sectors saw the biggest hit to activity and jobs. Employment in the leisure and hospitality sector fell 459,000, mainly in food services and drinking places. Employment in healthcare and social assistance also fell by a large 61,000. Interestingly, only 46,000 jobs were lost in retail, which seems very low compared to the number working in the sector.

Despite how poor the latest figures are, the BLS warns that the period covered by the survey predates most of the shutdowns related to the outbreak. Indeed, data on initial jobless claims for unemployment benefits (social insurance) show over 10 million new claims in the four weeks to 28 March.

As more data is released that shows the extent of the unfolding economic crisis, policymakers (fiscal and monetary) could return with more stimulus measures. Our forecast has the US unemployment rate reaching 8% by the end of the second quarter. Clearly, we are seeing just the tip of the iceberg and the start of a very deep recession.

Important information

This communication is marketing material. The views and opinions contained herein are those of the named author(s) on this page, and may not necessarily represent views expressed or reflected in other Schroders communications, strategies or funds.

This document is intended to be for information purposes only and it is not intended as promotional material in any respect. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The material is not intended to provide, and should not be relied on for, accounting, legal or tax advice, or investment recommendations. Information herein is believed to be reliable but Schroder Investment Management Ltd (Schroders) does not warrant its completeness or accuracy.

The data has been sourced by Schroders and should be independently verified before further publication or use. No responsibility can be accepted for error of fact or opinion. This does not exclude or restrict any duty or liability that Schroders has to its customers under the Financial Services and Markets Act 2000 (as amended from time to time) or any other regulatory system. Reliance should not be placed on the views and information in the document when taking individual investment and/or strategic decisions.

Past Performance is not a guide to future performance. The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested.  Exchange rate changes may cause the value of any overseas investments to rise or fall.

Any sectors, securities, regions or countries shown above are for illustrative purposes only and are not to be considered a recommendation to buy or sell.

The forecasts included should not be relied upon, are not guaranteed and are provided only as at the date of issue. Our forecasts are based on our own assumptions which may change. Forecasts and assumptions may be affected by external economic or other factors.

Issued by Schroder Unit Trusts Limited, 1 London Wall Place, London EC2Y 5AU. Registered Number 4191730 England. Authorised and regulated by the Financial Conduct Authority.