The U.S. economy reported a plummet of 701,000 nonfarm payrolls in the early part of March, according to new data posted Friday by the U.S. Bureau of Labor Statistics.
This marked the first decline in payrolls since September 2010. As a result, the unemployment rate increased by 0.9 percentage point to 4.4%, the greatest over-the-month increase since January 1975 and the highest unemployment level since August 2017.
The number of unemployed persons spiked by 1.4 million to 7.1 million in March, with the BLS citing the COVID-19 crisis for the statistical mayhem. The number of unemployed persons who reported being on temporary layoff more than doubled in March to 1.8 million while the number of permanent job losers increased by 177,000 to 1.5 million.
It’s important to note that this BLS report does not take the entire month of March into account. And recent data shows that nearly 10 million filed for unemployment in the last few weeks, meaning the BLS figure will rise significantly in next month’s report.
“This report reflects the initial impact on U.S. jobs of the public health measures being taken to contain the coronavirus,” Secretary of Labor Eugene Scalia said in a statement. “It should be noted the report’s surveys only reference the week and pay periods that include March 12; we know that our report next month will show more extensive job losses, based on the high number of state unemployment claims reported yesterday and the week before.”
The leisure and hospitality industries were particularly hard hit with a loss of 459,000 jobs, and other industries experiencing acute declines included health care and social assistance, professional and business services, retail trade and construction.
Within the mortgage and housing industry, there was a grim acknowledgment of an unprecedented economic crisis – yet several thought leaders tried to find bright spots in the dismal data.
Mike Fratantoni, senior vice president and chief economist at the Mortgage Bankers Association, noted the report “showed almost an additional 1.5 million households now working part-time when they would rather have full-time hours. The decline in the participation rate already indicates that some workers are stepping back from even looking for a job as the pandemic crisis continues.”
Fratantoni predicted next month’s employment numbers will record higher levels of job losses, which would lead to “a drop in demand for purchase mortgages,” although refinancing activity is expected to remain vibrant. He also noted one small bright spot in the new data regarding home construction.
“Although construction employment declined last month, there was a small increase in residential construction, with the decline driven by non-residential builders,” he continued. “When housing demand recovers later this year, we will once again be facing a supply shortage, so it is good to see that homebuilders are continuing to hire.”
Lawrence Yun, chief economist at the National Association of Realtors, also acknowledged that the residential side of the construction industry was stronger than the commercial property side, adding that residential construction jobs “were steady and higher by 27,000 from a year ago for actual building construction and higher by 44,000 among general contractors. We had a housing shortage before going into the crisis and home builders were gearing up to relieve the inventory tightness.”
Yun also maintained a sense of hopefulness for the newly out-of-work, explaining that “the enhanced unemployment insurance checks to make up for a good portion of lost income” and the post-pandemic weeks will be framed by “spending power ready to be unleashed once the all-clear signal is declared.”
Anthony Casa, chairman of the Association of Independent Mortgage Experts, warned that the U.S. economy in general and housing in particular could withstand continued waves of millions filing for unemployment benefits, with small businesses facing an existential crisis because most companies in that sector “do not have the money to shut down for multiple months.” And while Casa praised the mortgage industry for remaining “very strong” thanks to historically low rates, he expressed concern over the real estate industry.
“The longer this goes on, the bigger the impact on them,” he said. “Real estate is in for a tough year if home values decline.”