The Washington PostDemocracy Dies in Darkness

U.S. unemployment rate soars to 14.7 percent, the worst since the Depression era

20.5 million people lost their jobs in April, the Labor Department said Friday. Many analysts believe it could take years to recover.

May 8, 2020 at 5:05 p.m. EDT
Sean McGuire, who was laid off as a restaurant dishwasher, in March at a short-term Airbnb in Portland, Ore. (Leah Nash/For The Washington Post)

The U.S. unemployment rate jumped to 14.7 percent in April, the highest level since the Great Depression, as many businesses shut down or severely curtailed operations to try to limit the spread of the deadly coronavirus.

The Labor Department said 20.5 million people abruptly lost their jobs, wiping out a decade of employment gains in a single month. The speed and magnitude of the loss defies comparison. It is roughly double what the nation experienced during the entire financial crisis from 2007 to 2009.

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As the virus’s rapid spread accelerated in March, President Trump and a number of state and local leaders put forth restrictions that led businesses to suddenly shut down and shed millions of workers. Many businesses and households also canceled all travel plans. Analysts warn it could take years to return to the 3.5 percent unemployment rate the nation recorded in February, in part because it is unclear what the post-pandemic economy will look like, even if scientists make progress on a vaccine.

Trump, though, claimed in a Fox News interview Friday that there would be a quick rebound.

“Those jobs will all be back, and they’ll be back very soon,” Trump said.

Former vice president Joe Biden, Trump’s expected opponent in November’s presidential election, said in remarks broadcast by NowThis News that the jobs report illustrated “an economic disaster” that was “made worse” in part by a slow and uneven White House response to the crisis earlier this year.

Wall Street shrugged off the devastating news about layoffs. The Dow Jones industrial average gained 455.43 points on Friday. Stocks have rallied since early April, largely because of record levels of government aid for businesses and optimism that a cure is near. The lesson from the last recession, however, was that Wall Street recovered long before the rest of the country.

More than a quarter of workers faced job losses or underemployment in April

“This is pretty scary,” said Lindsey Piegza, chief economist at Stifel Fixed Income. “I’m fearful many of these jobs are not going to come back and we are going to have an unemployment rate well into 2021 of near 10 percent.”

The stark employment data could create even more urgency for a number of governors who are debating when to reopen parts of their state economies. Many are weighing the health risks and the economic toll, a harrowing choice, analysts say. Some hope that reopening quickly will get people back to work, but it will be difficult with many businesses operating at partial capacity and parents wrestling with child-care challenges.

The sudden economic contraction has already forced millions of Americans to turn to food banks, seek government aid for the first time or stop paying rent and other bills. As they go without paychecks for weeks, some have also lost health insurance and even put their homes up for sale. There is a growing concern that the damage will be permanent as people fall out of the middle class and young people struggle to launch careers.

“The impact on women and youth is particularly shocking and disproportionate,” said Lisa Cook, a professor at Michigan State University and former economic adviser to President Barack Obama. “Those who grew up during the Great Depression were hesitant to spend for the rest of their lives.”

As states reopen and finances tighten, some Americans are reluctant to return to work

Job losses began in the hospitality sector, which shed 7.7 million jobs in April, but other industries were also heavily affected. Retail lost 2.1 million jobs, and manufacturing shed 1.3 million jobs. White-collar and government jobs that typically prove resilient during downturns were also slashed, with companies shedding 2.1 million jobs and state and local governments losing nearly a million. More state and local government jobs could be cut in the coming weeks as officials deal with severe budget shortfalls.

Over 10 million Americans filed for unemployment in March. Here are some of their stories. (Video: The Washington Post)

There were even 1.4 million layoffs in health care last month as patients put off dental care, minor surgeries and other things beyond emergencies.

April’s unemployment rate was horrific by any standard, yet economists say it underestimates the extent of the pain. The Labor Department said the unemployment rate would have been about 20 percent if workers who said they were absent from work for “other reasons” had been classified as unemployed or furloughed. The official figure also does not count millions of workers who left the labor force entirely and the 5 million who were forced to scale back to part time.

What is clear so far is that Hispanics, African Americans and low-wage workers in restaurants and retail have been hit hardest by the job crisis. Many of these workers were already living paycheck to paycheck and had the least cushion before the pandemic hit.

“Low-wage workers are experiencing their own Great Depression right now,” said Ahu Yildirmaz, co-head of the ADP Research Institute, which focuses on job and wage trends.

The unemployment rate in April jumped to a record 18.9 percent for Hispanics, 16.7 percent for African Americans, 14.5 percent for Asians and 14.2 percent for whites.

Women’s unemployment was nearly three points higher than men’s, another disparity that largely reflects the prevalence of women in hard-hit hospitality and retail jobs.

It’s the largest gender-unemployment gap on record — the previous high was set during the Great Recession. That time, it was the men who were hit hardest.

Education has also emerged as one of the downturn’s starkest divides. While many highly educated white-collar workers have been able to do their jobs from home, low-wage workers do not have that luxury. The result is workers without any college education are losing their jobs at about four times the rate of their college-graduate peers.

In April, the unemployment rate soared to 21.2 percent for people with less than a high school degree, surpassing the previous all-time high set in the aftermath of the Great Recession.

While Congress has approved nearly $3 trillion in aid, it has been slow to arrive for many. Millions are still battling outdated websites and jammed phone lines to try to get unemployment aid and a relief check. Economists are urging Congress to act now to ensure aid does not end this summer, when the unemployment rate is still likely to be at historic levels.

“This unemployment rate should be a real kick in the pants — and maybe even the face,” said economist Claudia Sahm, a former Federal Reserve staffer and expert on recessions. “Congress has to stay the course on aid until more people are back at work.”

There is a growing consensus that the economy is not going to bounce back quickly, as Trump wants, even as more businesses reopen this month. Many restaurants, gyms and other businesses will be able to operate only at limited capacities, and customers, fearful of venturing out, are proving to be slow to return. And many businesses will not survive. All of this means the economy is going to need far fewer workers for months — or possibly years — to come.

“It’s not like turning a light switch and everything goes back to where it was in February,” Loretta Mester, president of the Federal Reserve Bank of Cleveland, said in an interview. “We depopulated everything quickly. Repopulating it will take a lot longer.”

Mester said the best cure for the economy at this point is probably more virus testing, monitoring and investment in a covid-19 treatment. Without those measures, people are unlikely to go out and spend again, even if stores and restaurants reopen.

“There’s still a lot of uncertainty about the second half of the year,” Mester said. “Consumer confidence has been really, really bad since mid-March.”

Many businesses initially did temporary layoffs because executives believed the shutdowns would be short-lived. About 18 million of the unemployed in April said their layoff was temporary, according to Labor Department data, compared with only about 2 million who said their job loss was permanent. But permanent layoffs are expected to escalate as time goes on. The Labor Department surveyed workers in mid-April.

“This is a catastrophe. When things go over a cliff, they usually they don’t recover quickly,” said David Blanchflower, an economics professor at Dartmouth College.

Many of the newly unemployed face strains they could not imagine just a few months ago.

Erin Huyler runs a child-care service in Key West, Fla., that was forced to close in mid-March. She is not sure when it will be safe to reopen, especially since many of children she watches are the kids of travelers visiting from other states and nations.

Congress approved additional money for the unemployed and expanded the program so gig workers and the self-employed, such as Huyler, could apply. But Huyler’s experience is indicative of that of millions still waiting for aid to arrive. Over 7,500 people have written in to The Washington Post about how they are still waiting.

Huyler has yet to get the relief check or unemployment money. She finally saw a deposit in her bank account for the Small Business Administration emergency loan she applied for weeks ago.

“That was helpful, but $1,000 is not a lot of money after seven weeks of unemployment,” Huyler said.

Sean Sullivan contributed to this report.