The Worst-Ever Jobs Report

By Matthew Klein |  Friday, May 8

Chart-breaker. Everyone knew the April jobs report would be unprecedentedly bad, but it’s still breathtaking. The U.S. private sector lost 15.1% of its workers – nearly 20 million people – in the space of a month. All previous downturns, including the global financial crisis, look insignificant by comparison. The share of Americans aged 25-54 with a job plunged to its lowest level since the mid-1970s, before most women had entered the workforce.

And yet ... stocks were up on the day, with the S&P 500 index gaining 1.7%. All 11 sectors were positive, with the biggest gains in energy, industrials, and materials. Every single one of the 30 stocks in the Dow Jones Industrial Average rose, led by Home Depot, Caterpillar, and Boeing. Bond yields were also up slightly, while oil prices gained 5% and the dollar edged lower. The markets are doing so well that the Nasdaq Composite is actually up year-to-date, and it's down just 7% since its all-time high in mid-February.

Part of the explanation is that most people think the job losses will reverse within 6 months. The number of people who say they weren’t working because they were on “temporary layoff” rose by 16.2 million. Exclude them and the number of people officially counted as unemployed hasn’t gone up at all since February. If those workers are right and everything goes back to normal in a year, then the current blip shouldn’t matter much for long-term assets.

The big assumption is that temporary job losses will actually be temporary. That’s been true in the past, but the past is no precedent for what’s happening now.

Another concern is the broad-based nature of the decline in employment. While the biggest job losses were in leisure, hospitality, and personal services, there were massive declines in almost every sector, including professional services, manufacturing, construction, healthcare, tech, media, finance, and local government.

We don’t yet have detailed data on changes in the length of the workweek for most occupations, but the figures from the manufacturing sector are grim. Moreover, the number of Americans working part-time who would rather work full-time more than doubled to 11 million. Similarly, there aren’t yet detailed breakdowns of hourly pay, but anecdotal reporting suggests many of the people who stayed employed got pay cuts and will end up with significantly less labor income. How that all flows through to spending and GDP depends on the magnitude and length of government support.