The Labor Department is expected to detail savage April job losses amid the peak of the coronavirus Friday, but even as the unemployment rate surges to eighty-year highs, the full cost of the economic cost of pandemic remains unknown.
Some 21.7 million American jobs were lost last month, according to the Street consensus forecast for today's April employment report, a record high figure that will lift the headline unemployment rate to 16.4%, a level last seen in the 1940s and the highest postwar total since 1982. The headline figure is also likely to wipe out the entire total of job gains recorded since the global financial crisis.
However, with more than 26.7 million people filing jobless claims over the five weeks between the March and April reports, and an unknown number of Americans laid off who haven't sought benefits, the already staggering figure could be even higher.
"The stubbornness of the initial claims numbers is dispiriting because the consumer services economy shut down almost two months ago," said Ian Shepherdson of Pantheon Macroeconomics. "Presumably, the vast majority of claims from laid-off front line staff have been made by now, though some processing backlogs persist."
"We hope most of these jobs will come back, but nothing is certain, especially in the restaurant and entertainment sectors, where social distancing requirements mean that many businesses will be running well below their former capacity for an extended period," he added.. "This, in turn, means that some will disappear for good."
U.S. Federal Reserve Chairman Jerome Powell, tasked with both ensuring that inflation doesn't run too hot in the world's largest economy while delivering full employment at the same time, cautioned last month that recovering lost jobs could take longer than markets are anticipating.
"While many standard economic statistics have yet to catch up with the reality we are experiencing, it is clear that the effects on the economy are severe," Powell told reporters after the Fed's April 29 policy meeting in Washington. "Millions of workers are losing their jobs."
"I think it is important that we do everything we can to avoid that longer-run damage and try to get back to where we were because I do very much have that concern," he added. "I think everyone is suffering here, but I think those who are least able to bear it are the ones who are, you know, losing their jobs and losing their incomes and have a little cushion to, you know, to protect them in times like that."
That protection, in the form of trillions in liquidity support for Wall Street and an expansion of the Fed's unprecedented 'Main Street' lending program, has swelled the central bank's balance sheet and lifted overall U.S. debt levels to around $24 trillion.
The Treasury will, in fact, borrow a record $3 trillion over the three months ending in June, a figure that is nearly three times higher than the whole of 2019, when it was told to fill the funding gap created by the Republican-led corporate tax cut.
The added borrowing, however, hasn't pushed Treasury bond yields notably higher: in fact, benchmark 2-year note yields touched a record low 0.129% last night as Fed Funds futures price in negative interest rates for the first time in the history of the U.S. economy.
This might be linked to the fact that investors are finding it difficult to believe that the Fed will be able to support a return to growth under its current policy framework, given that less than half of working-age America is now earning a monthly paycheck and that wakening the domestic economy from its government-induced coma will take many months longer than lawmakers anticipated.
"With numerous businesses likely to fail as the lockdowns take their toll, unemployment is unlikely to fall quickly – 8-10% would be a good outcome for end 2020," said ING's chief international economist James Knightley.
"We expect the economy to experience a peak to trough decline in excess of 13% by the end of 2Q 2020. Given ongoing social distancing for several more months, lingering consumer caution and the legacy of nearly 40 million jobs lost, we see little prospect of a V-shaped recovery," he added. "Even with additional fiscal support, the lost economic output may not be recouped until early 2023."