By Josh Mitchell
The U.S. unemployment rate likely soared in May to a new
post-World War II high, though there are signs the labor market is
slowly mending from the coronavirus pandemic and related
shutdowns.
The Labor Department is set to release its monthly snapshot of
employment Friday at 8:30 a.m. ET. Economists project millions of
additional jobs were cut last month, on top of the 21.4 million
jobs shed in March and April.
Job loss on such a scale is unprecedented in the postwar era.
The unemployment rate was 3.5% in February and surged in April to
14.7%, the highest level for records dating from 1948. Unemployment
may have approached 20% or more in May, economists think.
That would approach Great Depression levels. Census Bureau
research shows the jobless rate peaked in the 20th century at about
25% in 1933.
"We've never really been through such a large, sudden hit to the
labor market affecting almost everyone, from blue-collar workers to
white-collar workers, from job losses to wage cuts," said economist
Gregory Daco of Oxford Economics. He estimates more than half of
U.S. workers have lost a job, lost hours or suffered pay cuts
during the pandemic.
Friday's jobs report will offer a labor-market snapshot from
mid-May, when the government conducted its monthly survey of
households and businesses. Fresher data suggest the labor market
has since stabilized, though it likely suffered another setback
from protests and looting following the May 25 death of George
Floyd, who was killed in police custody in Minneapolis.
Many businesses in big cities had reopened or were set to reopen
only to be looted or forced to board up during the protests. That
could delay their reopening by days or weeks and cause another
round of job losses.
"We had every intention to be operating right now, but now we're
back stuck in the mud," said Mike Brand, owner of Penn Quarter
Sports Tavern in Washington, D.C., which boarded up this week.
"This extra week, maybe two with the riots, it's taking a huge
financial chunk."
Mr. Brand laid off all 28 of his employees in early March, after
nonessential businesses were ordered to close during the pandemic.
When the city began the first phase of reopening last month, Mr.
Brand rehired about half of his employees in the hopes of reopening
the bar this week. He now plans to reopen next week. But his
experience points to another challenge facing the labor market.
Many of his servers and bartenders have declined offers to come
back to work, he said. Some are fearful of catching the virus;
others don't want to give up their unemployment benefits, which
currently pay them more than they had earned at the restaurant. He
believes that as enhanced unemployment benefits expire he will have
an easier time finding workers.
Research confirms that the typical worker on unemployment is
earning more than he or she had been at work because of enhanced
benefits and stimulus money provided by Congress, said Becky
Frankiewicz, president of ManpowerGroup North America, a
job-placement company.
The Congressional Budget Office, in a letter Thursday to members
of Congress, said it estimated expanding enhanced jobless benefits
through January 2021 would mean five in every six claimants would
make more money from unemployment insurance than from work. The
program pays workers an extra $600 a week and is currently set to
expire in July. Lawmakers are debating whether to extend it as part
of a new stimulus bill.
Those benefits are a major reason that, despite the widespread
job loss, many economists believe the economy will rebound late
this year and many jobs will be recovered. Forecasting firm Moody's
Analytics projects that the unemployment rate will fall to 8.5% by
year-end and that the annual job loss will settle at 8 million. Mr.
Daco believes that at the worst of the pandemic, likely in May, job
losses totaled about 28 million but that by year-end employment
will be down by roughly 12 million.
Ms. Frankiewicz said there is a hopeful sign the labor market
has turned a corner as industry data her company analyzed showed
job postings rose in the past week by 10%. "As states start to
reopen we're seeing an increase in demand," she said. "When will we
be back? We got here overnight. We won't return overnight."
One big uncertainty is just how long some businesses will be
able to hold on, given that any recovery is likely to be painfully
slow. For example, many restaurants that are reopening are
operating at a much smaller capacity to comply with
social-distancing rules. In D.C., those rules mean Mr. Brand's
tavern will only be able to seat people outdoors.
In Portland, Ore., Kate Rafter said she had spent five weeks on
furlough when she returned to work the first week of May as a
business-systems analyst at a nonprofit that takes children on
field trips in the Pacific Northwest. Two days after she returned,
her boss told her she was being laid off. Many parents had canceled
plans to send their children on trips because of the risk of
catching the virus. The nonprofit said it could no longer afford to
employ Ms. Rafter, she said.
She had loved the job, which offered decent pay and great health
benefits, and she had planned to move out of her parents' home and
into a new place of her own. Now she is living off unemployment
benefits and the stimulus check Congress provided to many
households.
She is hopeful, though, because she has seen a number of job
postings in her field. "I think I'll be able to find something,"
she said. She has spent recent weeks knitting hundreds of masks,
which she has donated, and decluttering her parents' home.
Write to Josh Mitchell at joshua.mitchell@wsj.com
(END) Dow Jones Newswires
June 05, 2020 05:44 ET (09:44 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.