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Economy in Brief

U.S. Nonfarm Payrolls Collapse; Jobless Rate Surges by Almost One Point
by Tom Moeller  April 3, 2020

The job market unwound during March. The figures in today's report derive from a survey taken three weeks ago and, therefore, miss the bulk of the recent layoff activity due to the coronavirus outbreak.

Nonfarm payroll employment declined 701,000 (+1.0% y/y) with the majority of the deterioration occurring in service-producing industries. The plunge in March came after a 275,000 total payroll increase in February, revised from 273,000. Payrolls rose 214,000 in January, revised from 273,000. A 100,000 fall had been expected in the Action Economics Forecast Survey.

Average hourly earnings in the private sector actually rose 0.4%, following an unrevised 0.3% February improvement. A 0.2% rise had been expected. Growth of 3.1% y/y remained below its 12-month peak of 3.5%.

The unemployment rate jumped to 4.4% last month. It was the highest level since August 2017. A rise to 3.8% had been expected. Employment in the household survey weakened 2.987 million while the labor force declined 1.633 million. The overall jobless rate, including those who were marginally attached or working part-time for economic reasons, increased to 8.7%, its highest level in three years.

From the payroll employment survey, the 701,000 decline in jobs reflected an 18,000 (+0.1% y/y) weakening in factory sector employment, which was the fourth decline in six months. Construction sector employment fell an outsized 29,000 (+2.2% y/y) after three straight months of increase. The number of mining & logging jobs fell 7,000 (-4.7% y/y).

The number of private service sector jobs plunged 659,000 (+1.0% y/y). A 459,000 decline (-0.6% y/y) in leisure & hospitality jobs accounted for most of the drop, reflecting a 446,300 drop in hotels & restaurants. Education & health services employment collapsed 76,000 (+2.2% y/y). Professional & business services employment declined 52,000 (+1.5% y/y) which included a 49,500 drop (-2.1% y/y) in temporary help jobs. Employment in trade, transportation and utilities fell 49,000 (+0.4% y/y) which included a 46,200 shrinkage (-0.1% y/y) in retail trade. Information sector employment, in contrast, rose 2,000 (1.7% y/y.

Public sector employment increased 12,000 (0.9% y/y) as federal government jobs rose 18,000 (2.3% y/y). An 8,000 rise (1.0% y/y) in employment by local governments was offset by a 14,000 decline (+0.1% y/y) in state government jobs.

Average hourly earnings increased 0.4% (3.1% y/y), the strongest increase in four months. It included a 0.4% rise (3.2% y/y) in factory sector earnings. Private service sector earnings also rose 0.4% (3.1% y/y) as retail trade earnings also improved 0.4% (4.2% y/y). Professional & business services pay edged 0.1% higher (3.4% y/y), the weakest increase since January of last year. Information sector earnings rose 0.3%. The 2.6% y/y rise compared to a 7.2% y/y peak early last year. Financial sector earnings fell 0.3% with the 3.3% y/y rise below its 5.4% April 2018 peak. Leisure & hospitality earnings edged 0.1% lower (+2.6% y/y).

The length of the average workweek in private industry shortened to 34.2 hours, the least since January 2011. It was down from 34.6 hours in June 2018, which matched the expansion's peak. Hours in mining & logging fell to 45.5. Factory sector hours declined to 40.4 and they fell to 39.1 in the construction sector. Private service sector hours plunged to 33.0. The education & health services workweek also plunged to 32.9 from a cycle high of 33.1. The information services workweek lengthened to 36.4 hours. Leisure & hospitality hours weakened to 24.4 from 25.9 two months earlier.

From the household employment survey, the rise in the unemployment rate to 4.4% from a 50-year low of 3.5% occurred as the labor force participation rate fell sharply to 62.7%, equaling the low hit in August 2018. The teenage participation rate eased from a 12-year high to 35.5%, and for those aged 20-24, it plummeted 70.3%. For workers aged 25-54, the rate dropped sharply to 82.6%. For men in that age bracket, the rate eased to 89.0%. For women of that age, it fell sharply m/m to 76.4%, but remained up from the annual cycle low of 73.7% during all of 2015. For workers aged 55 & over, the participation rate eased to 39.8%, but remained increased from the historical low of 29.4% in 1993. The employment/population ratio fell precipitously to 60.0%, down from 61.1% in February. It remained up, however, from the cycle low of 58.4% in 2011.

The average duration of unemployment fell sharply to 17.1 weeks, less than half what it was at its high in 2011.

The teenage unemployment rate rose sharply to 14.3%, but remained below the 25.9% average in 2010. The rate for workers aged 20-24 surged to 8.7% from 6.4%. For workers aged 25-54, the rate jumped to 3.6%, the highest level since September 2017. It remained down from the annual average of 8.6% in 2010. For those over 55, the jobless rate surged to 3.3% from 2.6%.

By educational attainment, unemployment of workers without a high school diploma spiked to 6.8% from 5.7%. High school graduates without a college degree were 4.4% unemployed, up from 3.6% in February. Those with some college but no degree were 3.7% without work, up from 2.7% three months earlier. College graduates were 2.5% unemployed, increased from 1.9% in February and the most in nearly three years.

The labor market data are contained in Haver's USECON database. Detailed figures are in the EMPL and LABOR databases. The expectations figures are in the AS1REPNA database.

Employment: (SA, M/M Change, 000s) Mar Feb Jan Mar Y/Y 2019 2018 2017
Payroll Employment -701 275 214 1.0% 1.4% 1.6% 1.6%
 Previous Estimate -- 273 273 -- -- -- --
  Manufacturing -18 13 -22 0.1 1.2 2.0 0.7
  Construction -29 41 38 2.2 2.8 4.6 3.6
  Private Service-Producing -659 185 166 1.0 1.4 1.5 1.8
  Government 12 33 35 0.9 0.6 0.5 0.4
Average Weekly Hours - Private Sector 34.2 34.4 34.3 34.5 34.4 34.5 34.4
Private Sector Average Hourly Earnings (%) 0.4 0.3 0.2 3.1 3.3 3.0 2.6
Unemployment Rate (%) 4.4 3.5 3.6 3.8 3.7 3.9 4.3
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