Coronavirus: Pandemic sends US jobless rate to 14.7%

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Deserted Times Square, New York (7 May)Image source, Getty Images
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New York, the US financial capital, is also one of the US hotspots for the coronavirus

The US unemployment rate has risen to 14.7%, with 20.5 million jobs lost in April, as the coronavirus pandemic devastated the economy.

The rise means the jobless rate is now worse than at any time since the Great Depression of the 1930s.

Since the pandemic began, the US has suffered its worst growth numbers in a decade and the worst retail sales report on record.

Just two months ago, the unemployment rate was at 3.5%, a 50-year low.

"It is historically unprecedented," said economist Erica Groshen, former head of the government's Bureau of Labor Statistics, who now teaches at Cornell University. "We have put our economy into a medically induced coma in order to heal it from the pandemic... and that has led to the most precipitous loss of jobs seen in any of the modern data."

The report from the Labor Department showed declines in every sector of the economy.

Leisure and hospitality was hit especially hard, with payrolls falling by 7.7 million or 47%. Employers in education and health services cut 2.5 million positions, while retailers shed 2.1 million.

The Labor Department said more than three-quarters of those without jobs described themselves as temporarily laid off, a sign that many of those currently without work are hopeful that the economy will be able to rebound.

But economists warned that the pandemic is likely to force major changes to businesses - such as limits on how many people may be in a restaurant at one time - that could reduce the need for workers. And the longer the shutdown lasts, the more likely it is that a business will not survive.

"Even a temporary layoff can turn into a permanent one if the business doesn't survive or if the business has to change its business model so dramatically that it needs different numbers or a different kind of worker," Ms Groshen said.

The economic crisis is not unique to the US. In the UK, the Bank of England has warned of the sharpest recession on record, while Canada on Friday reported its unemployment rate had increased 5.2 percentage points to 13% last month.

Statistics Canada estimated that about a third of the workforce was either out of work, or working less than half of their usual hours.

In an appearance on the Fox News channel, US President Donald Trump shrugged off the 20.5 million jobs lost in the US as "totally expected" and "no surprise".

"Even the Democrats aren't blaming me for that. What I can do is I can bring it back," he said as the figures were released.

But bankruptcies have already claimed retailers such as J Crew and Neiman Marcus, as well as many firms in the energy sector, where a collapse in oil prices, due in part to a pandemic-related drop in demand, has worsened the strains.

Image source, Getty Images
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The jobless rate for black workers is the highest since 2010, and is at a record among Hispanics

While some states have already started to relax restrictions, re-starting the economy is likely to be difficult, as workers worry about the risk of infection and grapple with the impact of school closures.

"I'm not certain what's going to happen next," said Tanya Nikolaevskaya, a legal assistant in New York, who was furloughed last month, after working from home in March.

Ms Nikolaevskaya hopes to return to what she described as her dream job, but she has a medical condition that makes her worried about infection and is a single mother, whose 8-year-old daughter will need care if schools do not reopen.

"It's all about, 'Is there childcare,'" she said. "If I will not have childcare, I will not be able to go back."

The number of people in the labor force - working or looking for work - fell 2.5% last month, to its lowest level since 1970, while those reporting reduced hours or an inability to find a full-time job nearly doubled.

The Labor Department warned that the situation might be worse than estimated, pointing to the spike in the number of people who said they were employed but "absent from work". Including those responses suggests an unemployment rate closer to 20%, it said.

Among black workers, the unemployment rate jumped to 16.7%, the highest since 2010. Among Hispanics, it surged to a record 18.9%, while it climbed to a lower - but still record-setting - 14.2% among white workers.

Overall, the unemployment rate was the highest recorded in data back to 1948, while the over-the-month jobs decline was the largest reported in data back to 1939.

"The scale of the challenge cannot be overstated," said Robert Alster, head of investment services at wealth manager Close Brothers Asset Management.