Instant View: Coronavirus slams U.S. jobs growth in March

(Reuters) – The U.S. economy abruptly ended a historic 113 straight months of employment growth in March, as stringent measures to control the novel coronavirus pandemic shuttered businesses and factories, all but confirming a recession is underway.

The Labor Department said employers cut 701,000 jobs last month after adding a revised 275,000 in February. The unemployment rate shot up to 4.4% from 3.5%. Economists in a Reuters survey forecast a decrease of 100,000 jobs last month. Unemployment was seen rising to 3.8%.

MARKET REACTION:

STOCKS: After briefly adding to losses, S&P 500 e-minis EScv1 were down 10.25 points, or 0.41%.TREASURIES: Benchmark 10-year notes US10YT=RR last rose 8/32 in price to yield 0.6026%, from 0.627% late on ThursdayDOLLAR: The dollar index =USD rose 0.509%.

COMMENTS:

SAMEER SAMANA, SENIOR GLOBAL MARKET STRATEGIST, WELLS FARGO INVESTMENT INSTITUTE, ST LOUIS

“Coronavirus is going to have a very deep impact on the labor market. We’ve seen it in claims, now payrolls and company behavior. It just shows you how unprecedented this issue is. For a lot of companies and investors the strategy is to make it to the other side. For a lot of people they’re going to pull back as a first step. That’s what you see from the data.”

“April probably will be worse than March. There are some timing issues so it probably doesn’t reflect the full impact. It seems that things have gotten worse since the time of this report.”

“Average weekly hours could’ve been down more. Wage growth ticked up a little … It’s good that wage growth is holding in.”

“It’s tough to see this many people lose jobs this quickly. It could’ve been worse and markets were positioned for worse . The fact it wasn’t is somewhat of a positive.”

“It was a good bit of job loss. It’s going to impact consumption but markets were maybe prepared for much worse.”

DEV KANTESARIA, FOUNDER, VALLEY FORGE CAPITAL MANAGEMENT, PHILADELPHIA

“Short-term economic data provides little help to investors, who are seeking how to navigate the current crisis.  We know that the numbers will be ugly. We know that the country in many areas has come to a standstill. So, for investors the focus on the magnitude of job losses in the coming months is less important than where they think we will be twelve months from now.”

“Is there pent up demand that will materialize and lead to a fast recovery or will we sustain permanent job losses and witness wide ranging defaults and bankruptcies? I am optimistic that a year from now we will have regained much of our economic activity and returned to positive GDP growth.”

PETER CARDILLO, CHIEF MARKET ECONOMIST AT SPARTAN CAPITAL SECURITIES IN NEW YORK

“You have to take into consideration this isn’t the full impact just yet. That points to further erosion in the job market in the months ahead.”

“What can probably can cushion the stock market is the rise in crude this morning, which could alleviate the any serious selling pressures in the stock market. Basically I’m looking for a repeat of yesterday.”

“Investors were expecting a bad jobs number they got it.  But the coronavirus is probably mostly discounted in the markets. The worst of the selling us probably behind us.”

RUSSELL PRICE, CHIEF ECONOMIST, AMERIPRISE FINANCIAL SERVICES INC, TROY, MICHIGAN

“The report for March captured more of the decline than was expected. The market already knew that job losses recently have been historic and tremendous.

“When it comes to the non-farm payroll numbers there could also be some technical problems because of the Labor Department being unable to get in contact with businesses that have closed. The data will be somewhat volatile over the near term. The unemployment claims numbers are really the gold standard over the near term.

“At this point we are coming to terms with just how significant this is going to be. Early on the estimates kept getting larger, larger and larger. The data will be very bad before it gets much worse in April and May, before we start seeing improvements. Our estimate is for the unemployment rate to peak at approximately 18% in the month of May, but by the end of the year we should be back down to 8% or 9%.

“It takes time to get supply chains back up and running smoothly and for the economy to get back up to full speed. It will be very difficult for companies to handle a hiring surge of that magnitude.”

JOE BRUSUELAS, CHIEF ECONOMIST, RSM, IN AUSTIN, TEXAS

“The March jobs report foreshadows the earthquake and aftershocks that are rolling through the U.S. labor market. Policymakers and investors should expect several more months of such job losses. What we are watching in real time is the greatest bloodletting in the American labor market since the Great Depression.”

“I like to look at involuntary part-time employment. That’s one of my favorite stress metrics…That jumped from 4.31 million to 5.76 million. All of the gains and rehabilitation of the U.S. labor force brought in 2016 – in this metric – has been completely wiped away in one month.”

“All this is doing is giving us a glimpse into a world that no longer exists.”

JON HILL, INTEREST RATE STRATEGIST, BMO CAPITAL MARKETS, NEW YORK

“In spite of being one of the largest drops in payrolls in the history of the country, it’s not necessarily brand-new information. We’ve already seen initial jobless claims spike by millions, and everybody was expecting a bad print. The question was how bad? And based off of economists’ estimates it was a little bit worse than expected.”

“What’s a little more interesting is the almost nonresponse in the Treasury market and equity market because sure, this was worse than expected, you would have anticipated at least a little bit of a rally in Treasuries. What that speaks to, to me, is the market has already priced this bad of an outcome for the labor market. So even though we are still filling in the details of what the bad labor market will be in number terms, the economic outlook hasn’t shifted in response to this.”

SAM HENDEL, PRESIDENT & CO-PORTFOLIO MANAGER, LEVIN EASTERLY PARTNERS, CONNECTICUT

“The magnitude of the number is less important. We all know what the direction is. The question is really going forward – when do things start picking up?”

“This is all backward looking data and we know it’s going to be bad. Looking at data points ahead, as to how those evolve is going to be the key to analyzing when things are picking up again.”

“The real key data is looking at the cases, the percentage increase or decrease in cases or deaths.”

STEVE RICK, CHIEF ECONOMIST AT CUNA MUTUAL GROUP

“Frankly, this report is a looking glass into the past and doesn’t say a whole lot. This data demonstrates the state of the jobs market during the week of March 12th and things only went downhill quickly from there.”

“We won’t really see a true marker of our current labor market positioning until the April jobs report. That said, we are clearly within the confines of a very steep  slowdown and I expect unemployment could inflate to up to 7% towards the middle of the year.”

“Unlike 2008, the recession that we’re navigating through right now is characterized by a lot of uncertainty instead of fractures in the system and is hinged on an unforeseen pandemic to which we do not yet know an end nor a cure. Both markets and economy as a whole are very reliant on the healthcare sector, and things are not going to improve before the pandemic is clearly lassoed and wrangled.”

JJ KINAHAN, CHIEF MARKET STRATEGIST AT TD AMERITRADE IN CHICAGO

“No one knows what to do with this, is what this tells me. We knew it would be bad after the last two claims numbers, so now what. No shock that leisure and hospitality lost jobs. The one I was a little surprised with was healthcare and social services, so what I am thinking is that is really the social services of it more than healthcare because they probably just had to shut down, we know healthcare has a need. I’m not surprised average hourly earnings are up because restaurant and bar jobs are gone and those tend to be lower wages that are reliant on tips.

“It will be one of those days where they say we don’t know what to do with this so we are just going to trade on other things and just get through the week. The interesting thing will be to see what we do into the close. There has been some pressure on the close as people may not necessarily want to hold things over the weekend so we will see if that happens again. But if you look we were pretty muted overnight, meaning 50 S&P points,  but compared to where we have been lately, not a big reaction anywhere. The only thing that moves a lot was a very strong follow through in crude oil. But other than that it is almost like a normal day with a little bit of movement.”

JOHN DOYLE, VICE PRESIDENT OF DEALING AND TRADING, TEMPUS INC, WASHINGTON

“Most people going into this number were going to take this with a grain of salt only because of the shutdowns and furloughs that were happening toward the end of the month. Everyone is expecting April’s print to be a little more clear on what the actual situation is. But today’s jobs number and yesterday’s jobless claims report paint a picture of how bad things can actually be. But we’re expecting things to be very poor which is why you’re seeing limited reaction in the currency market so far.”

JUSTIN LEDERER, TREASURY ANALYST, CANTOR FITZGERALD, NEW YORK

“Basically it was a miss from what the survey was, but it’s not having a major effect on the market because there’s so much going through the system now, we don’t know exactly what’s happening and it’s hard to gauge the impact. It doesn’t show the whole story.”

“It’s important to see the numbers going forward and to see how the aid packages play out. In the bigger picture this data doesn’t mean that much, until we get a better picture of how the whole situation plays out. This is the smallest market impact I’ve ever seen from the payrolls number.”