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By the Numbers

Featuring brief segments of economic analysis from our senior economist Michael Bazdarich, PhD.

The economic analysis we previously featured in By the Numbers is now available on the Western Asset Blog. This page will no longer be updated.


Effects of Virus Obvious in March Payroll Data

Private-sector payroll jobs declined a jolting -713,000 in March, as the effects of COVID-19 on the economy began to set in earlier than expected. Our preferred jobs measure, private sector excluding construction and retailing, showed a decline of -638,000.

These declines were "earlier" than anticipated, because the understanding has always been that "monthly" payroll data actually refer to a specific pay period of the month, that including the 12th of the calendar month. With widespread virus-related shutdowns beginning only after March 13, most economists’ guesses were that the March payroll report would show little or no effect of the shutdown.

Instead, again, we saw a large drop in payroll jobs. So, either employers were quicker to respond than we understood, or our understanding of how the jobs data are constructed is flawed.

By way of comparison, jobs losses AVERAGED -764,000 per month over the six months from November 2008 through April 2009 that marked the nadir of the Great Recession. So, the March declines are on par with the worst of the Great Recession, and we believe that April data will likely be worse. As bad as the March declines were, they are still a very early look at the virus effects, and job losses are sure to be worse in the months to come.

The epicenter of the economy’s current plunge will be in the "leisure" sectors: travel, accommodation, recreation, and food services, and these sectors dominated the March declines, but not as much as one would have expected. Food services (restaurants) showed a job loss of -417,000 (almost -4%), but accommodations (lodging) was down “only” -29,000 (about -0.1%) and recreation down -13,000 (-0.5%), with passenger travel down only slightly. These last three sectors are likely to see much steeper losses in April.

Altogether, these four "broad leisure" sectors employed 17.2 million in February, and the ultimate losses there could come to 50% of that count. Much will depend on how long the shutdowns last and how much assistance employers receive in sustaining their workforce in the face of these unprecedented, forced closures.

Meanwhile, other sectors registered some surprising (surprisingly early) declines. Retailing lost -46,000 jobs, with losses concentrated at stores selling "discretionary" items such as vehicles, furniture, apparel and sporting goods. Health care other than hospitals lost -43,000 jobs. Employment agencies lost -49,000 jobs (-1.3%), as firms were relatively quick to shed temporary assistance. Construction and manufacturing job losses were relatively mild, understandably, at -29,000 and -18,000, respectively.

Again, the March losses are just the beginning. We are still of the mind that the US economy can rebound quickly when and as virus infections come down and shutdowns are lifted. However, that date is still in the uncertain future, and in the meantime, we all need to brace for economic numbers that will get worse before they get better.

Monthly Job Growth
Monthly Job Growth
Source: Bureau of Labor Statistics. Adjusted for Verizon strike in 2016 and GM strike in 2019. As of 31 Mar 20

Michael Bazdarich

Product Specialist/Economist

Mike brings more than 43 years of experience to his position. "By the Numbers" will address economic data releases that are pertinent to a broad range of investors.

Prior to joining the Firm in 2005, Mike ran his own consulting firm, MB Economics. He earned his PhD in Economics at the University of Chicago.

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