There is little doubt the coronavirus will cost more American jobs than the housing collapse. The depth of the drop in work will be deeper in the week ahead when the April jobs report is released on Friday.
Companies shed 701,000 jobs in March just as efforts to slow the spread of COVID-19 were taking hold. Stay-at-home orders and business shutdowns in April led to 20 million people filing for state unemployment benefits for the first time.
Just how many of those jobs are ready to return as the economy reopens is a key question for investors and policymakers. A Federal Reserve study examining payroll data from ADP finds a big difference between permanent job cuts and temporary furloughs. Between mid-February and early April, the research says paid employment dropped by 18 million. By comparison, only a third of those positions were deleted from company payroll systems. If the analysis holds, 12 million of those job cuts were temporary.
Investors know the April employment picture was bleak. The insured unemployment rate in mid-April was 12.4 percent. That’s a different measurement of unemployment than the number the government will release on Friday. It doesn’t capture people who don’t qualify for state unemployment benefits, whose benefits have run out, or never filed for those payments.
Any unemployment rate over 11% would be a post-Great Depression high. Yes, you read that right — Great Depression, as in the 1930s.
Yet, the stock market has staged a remarkable rally from its COVID-fueled collapse. Shareholders expect the Federal Reserve will continue supporting the economy with unprecedented borrowing actions. Investors also are pricing in a sharp economic snapback.
While the employment data may a lagging indicator, the investment markets don’t expect the bad news to last long.
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ABOUT THE WRITER
Financial journalist Tom Hudson hosts “The Sunshine Economy” on WLRN-FM in Miami, where he is the vice president of news. He is the former co-anchor and managing editor of “Nightly Business Report” on public television. Follow him on Twitter @HudsonsView.
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