US unemployment has surged to 14.7 per cent, its highest level since the second world war, after 20.5m Americans lost their jobs last month following lockdowns that choked off the world’s biggest economy.
The fall in non-farm payrolls in April — the largest drop on record — compared with economists’ expectations for a decline of 21.7m. That was up from 870,000 in March, the US labour department said on Friday.
The unemployment rate, which had been hovering at 50-year lows before the pandemic hit, was better than the 16 per cent economists had expected and up from 4.4 per cent in March when non-essential businesses first began to close.
The jobless rate peaked at 10 per cent during the 2008-09 financial crisis, and was estimated to have surged to about 25 per cent during the Great Depression.
Employment fell sharply across all major sectors, with particularly heavy job losses in leisure and hospitality.
The labour force participation rate, which measures people in work or looking for employment, decreased by 2.5 percentage points from March to 60.2 per cent, as social distancing measures affected people’s ability to look for work.
Counter-intuitively the report showed wages climbed as lower-paid workers such as restaurant employees were among those most affected by lay-offs. Average hourly earnings were up 7.9 per cent from a year ago, compared with expectations for a 3.3 per cent rise.
Market reaction to the historic jobs report was mixed. Long-dated treasuries sold off, with the benchmark 10-year bond yield rising roughly 0.03 percentage points to 0.66 per cent. The more policy-sensitive two-year note gained slightly, sending its yield lower to 0.13 per cent. Yields fall when prices rise.
US equity futures held onto earlier gains, pointing to 1 per cent rise in the S&P 500 when trading commences. The dollar index was unchanged.
Efforts to curb the spread of the pandemic, which has killed more than 70,000 Americans to-date, began in March. States began to introduce social distancing measures and close non-essential businesses and resulted in more that 33m Americans filing for first-time unemployment benefits and ended the longest running US economic expansion on record.
The Trump administration and Congress have sought to support businesses and Americans through the near $3tn stimulus package, which includes relief cheques for taxpayers and $660bn in loans earmarked for small businesses aimed at keeping employees on the payroll.
Job losses in battleground states like Michigan and Pennsylvania, that helped propel Donald Trump to victory in 2016, could have major implications for the president who had staked his re-election bid on a strong economy.
Additional reporting by Colby Smith