The devastating effect of Covid-19 on the US economy became clearer on Friday with the release of the highly anticipated US employment report. The Labor department revealed that nonfarm payrolls fell by 20.5 million in April and that the unemployment rate rose to 14.7%. Both figures beat analyst forecasts but mark records during the post World War II period. Just two months ago the unemployment rate was at a 50 year low of 3.5%.
The leisure and hospitality sector lost 7.7 million workers, as Americans stayed home to avoid the coronavirus pandemic. Retail employment fell by 2.1 million as foot traffic evaporated.
The April U6 unemployment rate – sometimes called the ‘real’ unemployment rate – which includes workers no longer looking for jobs and part-time workers who are seeking full-time employment, soared to 22.8%.
Economist Justin Wolfers tweeted “This is obviously the steepest decline in labor market conditions ever, and I can almost guarantee that it’s the worst that you’ll ever see in your lifetime.”
Nobel Laureate Paul Krugman compared the figures to the Great Depression, tweeting: “Historical perspective: this is close to estimates of peak unemployment during the Great Depression, and worse than unemployment for most of the 1930s.”
The Dow opened over 200 points higher on Friday, amid the grim but better than expected employment data. Hopes of economic recovery were lifted late on Thursday, after Califorinia Governor Gavin Newsom released guidelines for partial easing of business restrictions.