The official jobs report out Friday will be one of ‘worst ever’ in US history, a Federal Reserve bank boss has warned.
James Bullard, President of the St Louis Fed, told CNBC the ‘unemployment rate is going to be extremely high’, adding: ‘We think 20 per cent isn’t unlikely, could even be higher than that.’
His stark warning came two days before the official monthly job figures from the U.S. Labor Department are released. Economists believe the Friday report will reveal unemployment in the U.S. stands at least 16 per cent, up from 4.4 per cent in March.
A Wednesday report from payroll company ADP said U.S. businesses cut an unprecedented 20.2 million jobs in April.
The massive drop in U.S. private payrolls for April, reported on Wednesday, is ‘not a surprise’ but employment could recover dramatically in the second half of the year if the coronavirus pandemic is controlled, Bullard said.
He said ‘it can come down under double digits by year end,’ if economic relief programs work well and the virus is adequately controlled.
James Bullard, President of the St Louis Fed, right, told CNBC the official jobs report out Friday will be one of ‘worst ever’ in US history
Bullard added: ‘You’ve also got this PPP program, which has encouraged firms to keep their workers on their payrolls even though they’re not doing that much business.
‘It’s not surprising. It’s a pandemic. It’s a shutdown situation.’
In November last year President Trump gloated about a ‘blowout’ job creation record Trump tweeted ‘GREAT JOBS REPORT!’
But the Wednesday report from payroll company ADP showed the tragic depth and scale of job losses that left no part of the world’s largest economy unscathed.
The losses will likely continue through May, with a recovery in hiring likely to begin in the months that follow, said Mark Zandi, chief economist at Moody’s Analytics.
‘This is one for the record books,’ Zandi said. ‘The good news is that we’re at the apex of the job loss.’
Even though Zandi expects hiring to resume in June as states ease lockdowns, he cautioned that it will be a ‘slog’ over several years to recover all the jobs lost in April.
The private industry report comes two days ahead of the official monthly job figures from the U.S. Labor Department.
According to ADP, the leisure and hospitality sector shed 8.6 million workers last month. Trade, transportation and utilities let 3.4 million people go. Construction firms cut nearly 2.5 million jobs, while manufacturers let go of roughly 1.7 million people.
The health care sector cut 1 million jobs, but education services eked out a gain of 28,000 as colleges and universities do not appear to have forced significant layoffs that could come later this year.
There were 3.8 million new claims for unemployment benefits filed last week, according to the latest Labor Department figures released last Thursday
More than 30 million Americans have now lost their jobs in the six weeks since the coronavirus outbreak began as the US economy slides further into a crisis that is becoming the most devastating since the 1930s
More than half of April’s job losses came from smaller companies with 500 workers or fewer. But larger employers cut 8.9 million jobs.
Polling by The Associated Press and NORC Center for Public Affairs Research indicates that nearly eight in 10 households that suffered job losses expect to return to their previous employer.
‘One thing for sure is that this pandemic health crisis has produced depression-magnitude job losses which means this recovery is going to take longer than many are thinking,’ said Chris Rupkey, chief economist at MUFG in New York.
‘The Great Depression lasted three and a half years, and it will be a miracle if the economy gets anywhere near back to normal within the next couple of years.’
Data for March was revised to show private payrolls decreasing by 149,000 jobs instead of the previously reported 27,000, which was the first decline since September 2017.
The ADP report is jointly developed with Moody’s Analytics.
Dismal US employment figures are expected with the release Friday May 8 of figures for April’s US jobs report, with 30 million Americans filing for unemployment in the last six weeks
A man writes information in front of Illinois Department of Employment Security in Chicago. U.S. businesses cut an unprecedented 20.2 million jobs in April
The staggering numbers were widely anticipated, since 30.3 million people had filed claims for unemployment benefits since March 21, equivalent to nearly one out of every five workers losing their job in just over a month.
The ADP report was published ahead of the government’s more comprehensive employment report for April scheduled for release on Friday. While it has a poor record predicting the private payrolls component of the government’s employment report because of methodology differences, economists said it offered some clues on the size of anticipated job losses in April.
The ADP noted that its April report ‘does not reflect the full impact of COVID-19 on the overall employment situation.’
‘The ADP report and the government data don’t always align, but at least the ADP report suggests that we are in the right ballpark when thinking about the massive job losses to expect in the government data,’ said Daniel Silver, an economist at JPMorgan in New York.
According to a Reuters survey of economists, nonfarm payrolls are forecast to have tumbled by a historic 21.853 million in April, which would blow away the record 800,000 dive seen during the Great Recession.
Employment dropped by 701,000 jobs in March, ending a record streak of gains dating to September 2010.
The unemployment rate is seen jumping to 16 per cent in April, which would shatter the post-World War Two record of 10.8 per cent touched in November 1982. In March the jobless rate shot up 0.9 percentage point, the largest monthly change since January 1975, to 4.4 per cent.