Private sector employers cut an unprecedented 20,236,000 jobs through April 12 and probably many more since that time because of the economic impact of the coronavirus pandemic, according to the latest monthly employment report from payroll giant ADP, wiping out most of the jobs gained since the 2008-09 recession despite extensive tax cuts and stimulus payments from the IRS.
ADP noted that its
"Job losses of this scale are unprecedented,” said Ahu Yildirmaz, co-head of the ADP Research Institute, in a statement Wednesday. “The total number of job losses for the month of April alone was more than double the total jobs lost during the Great Recession. Additionally, it is important to note that the report is based on the total number of payroll records for employees who were active on a company's payroll through the 12th of the month. This is the same time period the Bureau of Labor Statistics uses for their survey."
Small businesses were hit hard by the pandemic and lost more than 6 million jobs, including 3,361,000 in businesses with between one and 19 employees, and 2,644,000 in businesses with between 20 and 49 employees.
Medium-sized businesses with between 50 and 499 employees lost 5,269,000 jobs. Large businesses cut 8,963,000 jobs, including 1,342,000 in businesses with between 500 and 999 employees, and 7,621,000 in companies with 1,000 employees or more.
“This is one for the record books,” said Mark Zandi, chief economist at Moody’s Analytics, which compiles the monthly employment report with ADP, during a conference call with reporters Wednesday. “A decline of just over 20 million jobs in the month of April is not surprising and very consistent with the surge in initial claims for unemployment insurance in recent weeks. Cumulatively, the UI claims are up about 30 million. Of course, these are applications for UI, and not all of them will be approved.”
The job losses of 20 million from mid-March until mid-April followed on the heels of 700,000 lost jobs in the previous month-long period, for a total of nearly 21 million total job losses just through the middle of last month. The job losses by now are probably at least equal to the 30 million unemployment applications that have been submitted so far. Many people have reported difficulty even filing unemployment claims with their states as websites crash with the surge of applications and phone lines at unemployment bureaus are overwhelmed with calls.
The service-providing sector lost over 16 million jobs, including 1,167,000 in professional and business services such as tax prep and accounting, while the financial activities sector lost 216,000 jobs, and the leisure and hospitality sector lost 8,607,000 jobs. The goods-producing sector lost 4,229,000 jobs, including 2,477,000 jobs in construction and 1,674,000 in manufacturing. The franchise sector lost 1,082,200 jobs.
“The job losses are, as you would imagine, across the board,” said Zandi. “The biggest declines, no surprise, were in the leisure and hospitality industry. Travel has been curtailed. The retail trade was hit very hard. Construction and manufacturing are all losing millions of jobs. Health care lost about a million jobs as many health care facilities had to shut down in recent weeks. The only sector that didn’t lose jobs was educational services because of universities and junior colleges training, but I’m not sure how long that will continue.”
The job losses were broad based across company size, with every class seeing substantive job declines, but they were disproportionately high for small businesses. “The largest declines were for smaller companies, those with fewer than 500 employees, which traditionally is a benchmark for a small business, with 11 million of the 20 million lost jobs,” said Zandi. “The most significant job losses were with the companies fewer than 50 employees. Just to give you a sense of that, the percentage decline in the month was about 15 and a half percent. For companies that have fewer than 50 employees, the percentage decline was 17.9 percent. Just to round it out, big companies also laid off, but as a percent of their employee base, it was smaller. Companies with over 1,000 employees saw a 13.2 percent decline in employment. Across the board, it was disproportionately hard on smaller companies.”
He expects to see more job losses for the remainder of the month, but he anticipates that to change over the summer.
“I do think we’ll continue to see more job losses for the month of May, the current month, not nearly what we saw in April, but if we see another million or two lost jobs, I wouldn’t be surprised,” said Zandi. “Cumulatively the job losses in March, April and May will wash out all of the job gains that we experienced in the the record-long economic expansion leading up to this point in time. We’ll ultimately lose all those jobs. I do think, though, the worst of it is at hand. I wouldn’t be surprised if by the end of this month, as we’re making our way toward Memorial Day, the job losses abate and we start to see some job growth, and I would anticipate more substantive job growth in June, July and August.”
That will depend on several factors, including business reopenings. “Businesses are starting to reopen across the country,” said Zandi. “I believe 32 states are now on track to reopen, at least partially. And I am sure that we will see more states open up as we move through the month and move through the summer. That will result in rehiring of millions of workers. Now I don’t think we’re going to get back 20 million, 22 million lost jobs over the next few months, but I would anticipate that we get roughly half of those jobs during that period.”
The various stimulus programs from the federal government, such as the Paycheck Protection Program from the Small Business Administration, and the extra support from the Federal Reserve, should also help.
“The most direct program is the Paycheck Protection Program (PPP), which does provide money to businesses, the smaller businesses, that turn into grants if the business rehires workers, so I would anticipate that we see some benefit from that program, which has been very popular,” said Zandi. “Well over $600 billion of money has been already allocated to businesses. That had some impact, and it should become more evident in May, particularly as we move into the summer months in June and July. We should see a turn here in the job statistics, at least for the next few months, and I would anticipate some big positive numbers.”
However, he doubts the economy will soon regain close to the number of jobs lost over the last few months. “That’s going to take a while,” said Zandi. “On the other side of this bounce in economic activity as businesses reopen, I think the economy is going to struggle to create lots of jobs until there is some kind of medical solution to the virus, like a vaccine or a therapy or something to make people more comfortable about doing what they normally do. I think it will be a while before we get back to where we were. It will probably take several years to regain those jobs. The good news is that I think we’re at the apex of the job loss, but what’s evident in today’s ADP number is really something that I don’t think anybody else is going to be able to say — that we lost 20 million jobs in a month, but we’re making a turn here and I would expect conditions to improve. It’s not going to be a quick revival. It’s going to take some time. It may take more support from lawmakers and the Federal Reserve, but I think we’re going to make our way back here in the next few weeks.”
