Stunning Jobs Report Shows 701,000 Lost Jobs. And The ‘Horror Show’ Is Yet To Come

The March jobs report is just an appetizer. Understand that.

The reference week for the figures out Friday doesn’t capture most of the lockdowns, business closures and various other mandatory coronavirus containment measures which brought the US economy to a halt late last month, precipitating the largest spike in weekly jobless claims in the history of modern US economic statistics.

Those stunning claims figures are a window into the future – and the future promises to be a dreary place indeed. Thursday’s 6.65 million claims print was ten times (that’s 10x) the pre-March 2020 record set in 1982.

That’s a taste of what you can expect from the main course on monthly US payrolls, which will be served in April, May and June.

As for Friday’s “stale” data, the report shows the US economy shed 701,000 jobs in March, marking the first decline since 2010 and coming in far, far worse than consensus, which was expecting the timing issue to translate to a relatively “benign” drop of around 100,000.

Revisions trimmed 59,000 from January’s report which brings the headline down to 214,000 and added 2,000 to February’s figure, which moves marginally higher to 275,000.

The leisure and hospitality industry lost 459,000 jobs during the survey period, with “most of the decline occurring in food services and drinking places”, the BLS said. “This employment decline nearly offset gains over the previous two years”, the report reads. “Employment in the accommodation industry declined by 29,000.

In addition to the timing issue, there are myriad other reasons to cast a wary eye at March’s already horrific figures including, but not limited to, the perceived unreliability of the business “birth-death” model at critical junctures (such as now), and the possibility that everyone simply had “better” things to do last month than participate in the survey – things like, you know, saying tearful goodbyes to employees whose final day at work was spent scrawling “Sorry, we’re closed for the apocalypse” on homemade poster board signs for the front door.

In other words, as bad as this is, it might well get considerably worse, and the fact that it’s already this bad is unnerving, to say the least. The unemployment rate spiked from a five-decade nadir of 3.5% all the way to 4.4%.

It goes without saying that will go much, much higher.

It’s worth noting that more than a week ago, Morgan Stanley projected the big drop in March payrolls and suggested the unemployment rate would average nearly 13% in the second quarter.

Cleveland Fed boss Loretta Mester on Thursday said unemployment could rise as high as 15%. Some estimates have the figure spiking as high as 20% and even 30%, depending on how the virus containment measures evolve.

Data from ADP out Wednesday (which suffered from the same timing “defect” when it comes to capturing the true extent of the March malaise) did show America’s small businesses shedding the most jobs since 2009.

The breakdown of the March jobs report shows private payrolls falling 713,000. Consensus was looking for just a 131,500 drop.

Manufacturing payrolls contracted 18,000, worse than consensus.

Average hourly earnings rose 0.4% MoM, double the estimate and 3.1% YoY.

Again, this is but an appetizer – or maybe it’s not even that. Perhaps this is better described as an amuse-bouche – a chef’s selection, served free of charge to whet your appetite for what Credit Suisse’s James Sweeney describes as “the horror show” to come.

Estimates and priors

• Change in Nonfarm Payrolls, est. -100,000, prior 273,000
• Change in Private Payrolls, est. -131,500, prior 228,000
• Average Hourly Earnings YoY, est. 3.0%, prior 3.0%
• Change in Private Payrolls, est. -131,500, prior 228,000
• Change in Manufact. Payrolls, est. -10,000, prior 15,000
• Unemployment Rate, est. 3.8%, prior 3.5%
• Average Hourly Earnings MoM, est. 0.2%, prior 0.3%
• Average Weekly Hours All Employees, est. 34.1, prior 34.4
• Labor Force Participation Rate, est. 63.3%, prior 63.4%
• Underemployment Rate, prior 7.0%

Actual

• U.S. March Nonfarm Payrolls Fell 701k; Unemployment Rate at 4.4%
• Nonfarm payrolls forecast est. -100k, range -4000k to 100k from 78 economists surveyed
• Nonfarm payrolls, net revisions, -57k from prior two months
• Nonfarm private payrolls fell 713k vs prior +242k; est. -132k, range -660k to 50k from 36 economists surveyed
• Manufacturing payrolls fell 18k after rising 13k in the prior month; economists estimated -10k, range -50k to 0k from 18 economists surveyed
• Avg. hourly earnings 0.4% m/m, est. 0.2%, prior 0.3%; Y/y 3.1%; est. 3.0%
• Unemployment rate 4.4% vs prior 3.5%; est. 3.8%, range 3.5%-5.6% from 77 economists surveyed
• Participation rate 62.7% vs prior 63.4%
• Change in household employment -2,987k vs prior 45k