A8| Saturday/Sunday, April 4 - 5, 2020 *** THE WALL STREET JOURNAL.
THE CORONAVIRUS PANDEMIC
CAPITAL ACCOUNT|By Greg Ip
UncertainPathofVirusPosesItsOwnRisk
The
monthly jobs
report is usu-
ally a moment
of maximum
economic clar-
ity. It’s a rich and timely
snapshot that calibrates as-
sessments of where the econ-
omy is and where it’s headed.
Not this time. Bad as Fri-
day’s report is—showing
more than 700,000 jobs lost
in March—it shows us condi-
tions before the worst of the
coronavirus-related layoffs
hit. Even Thursday’s jaw-
dropping tally of more than
six million initial claims for
unemployment insurance
filed last week doesn’t tell us
how deep the job loss will be
or how long it will last. It
isn’t just the magnitude of
this shock that is unprece-
dented but the uncertainty
surrounding almost every
facet of it—uncertainty that
is corrosive in its own right.
In normal times, we know
enough about the historical
probabilities of certain
things, whether mortality
rates, recessions or bear
markets, to quantify the risks
around the future. Now we
are struggling not with risk
but what the late economist
Frank Knight defined as un-
certainty: We don’t know
enough about the underlying
nature of our circumstances
to meaningfully measure risk.
Today, there are at least
four distinct sources of un-
certainty: first, the severity
and spread of the pandemic;
second, the breadth and du-
ration of social-distancing
measures; third, the eco-
nomic and financial impact
of those measures; and
fourth, the policy response.
Moreover, they all inter-act. The more infectious the
disease proves to be, the
tougher the social-distancing
measures must be and the
greater the economic fallout
and the more aggressive a
policy response is needed.
Humans hate uncertainty
and gravitate to those with
the most confidence in their
predictions, but these days,
excessive confidence should
be greeted with skepticism.
In a moving blog post, Gor-
don Dougan, a Cambridge
University professor who has
spent his career researching
vaccines and disease, re-
cently wrote: “What is the
value of experts like me? I
likely know more about infec-
tion, epidemics and vaccines
than most. I have studied ep-
idemics across the world. I
have made and designed vac-
cines. Do I know what will
happen next with this epi-demic? Which of the experts
are right? The World Health
Organisation (WHO)? The
politicians and their teams of
scientists and modellers? In
reality, we are all trying to
take informed guesses.”
The same goes for the
economists. On Thursday, the
nonpartisan Congressional
Budget Office projected the
unemployment rate would tri-
ple to 12% this quarter and
still stand at 9% by the end of
next year. The CBO devoted
an entire section of the ac-
companying letter to the “ex-
traordinary degree” of uncer-
tainty around its assumptions.
Uncertainty has real-world
consequences. In a study re-
cently published by the Na-
tional Bureau of Economic
Research, Guglielmo Briscese
of the University of Chicago
and three co-authors found
locked-down Italians weremore likely to comply with
self-isolation instructions if
they thought the confine-
ment was short and finite.
“To maximize the effective-
ness of temporary isolation
efforts, authorities must man-
age public expectations on
when such measures will be
relaxed or lifted,” they wrote.
Evidence from behavioral
economics shows people will
pay more to avoid really bad
outcomes, such as death or
destitution, even when the
probability is small. Simi-
larly, the standard formula
for policy makers faced with
such uncertainty is to mini-
mize the probability of really
bad outcomes—erring on the
side of tougher health mea-
sures, and more expansive
economic support.
More bad news on both the
disease and economic disloca-
tion is yet to come. Still, thatmay at the margin reduce un-
certainty by refining policy
makers’ and individuals’ un-
derstanding of the disease
and its consequences. With
each passing week we know
more about the virus and the
efficacy of social distancing.
Right now, things are
worsening at an accelerating
rate. Pessimistic as forecast-
ers were in anticipation of
this week’s job numbers, they
weren’t nearly pessimistic
enough. But at some point
things will get worse at a de-
celerating rate. Rates of in-
fection, hospitalization and
death will decline followed by
the economic consequences.
When will that happen?
That stocks are still volatile
but at a relatively stable level
in the last two weeks suggests
investors think that moment
is close. Of course, even that
interpretation is uncertain.Some economists have some-
what more positive—though
still dire—forecasts.
IHS Markit projects 14 mil-
lion jobs will be lost by Decem-
ber. The forecasting firm ex-
pects the unemployment rate
to peak near 10%, or close to
previous records.
Joel Prakken, IHS Markit’s
chief U.S. economist, said the
forecast assumes a pickup in
hiring among other businesses.
“I think there will be more
of an offset than some real-
ize,” he said, pointing to hiring
announcements by grocery
stores, online retailers, ware-
houses and pharmacies. Mr.
Prakken projects employment
will return to early 2020 levels
by fall 2022. Next year, he
said, it won’t be unusual for
monthly jobs reports to show
700,000 or more jobs added.
“The recovery will be much
faster than from past down-
turns,” he said.
—Michelle Hackman
contributed to this article.Health Clubs. “I had to shut
down the clubs. It was too
risky for everyone involved.”
Mr. Hammel closed his busi-
nesses before being mandated
to do so by states, but the lay-
offs occurred too late to be re-
flected in Friday’s data.
He said he hopes govern-
ment loans will allow him keep
up with insurance and mainte-
nance payments. Mr. Hammel
said he plans to rehire all his
staff when cleared to reopen.
Other businesses have an-
nounced mass layoffs in recent
weeks—all too late for the
March report.
Las Vegas casinos shut on
March 18—and 10% of Nevada’s
workforce has since sought un-
employment assistance. That
same day, Detroit auto makers
laid off 150,000 workers.Mar-
riott InternationalInc. said
last month that tens of thou-
sands of hotel staff would be
furloughed. Macy’sInc.,Gap
Inc. andKohl’sCorp. let work-
ers go this past week.lion positions cut from payrolls
during the 2007-09 recession
and its aftermath. And those
jobs were lost over 25 months.
The nonpartisan Congres-
sional Budget Office said
Thursday that the unemploy-
ment rate would exceed 10% in
the second quarter. The high-est monthly unemployment
rate on record, going back to
1948, is 10.8%, set in late 1982.
Laury Hammel said he fur-
loughed 600 employees at six
health clubs in New England
andUtahonMarch16.
“It was the darkest day of
my career,” said Mr. Hammel,
chief executive of Longfellowis receiving in unemployment
benefits is less than half her
regular pay because much of
her income came from tips.
She said she is moving in
with her sister, a cook at an
assisted-living facility. “Get-
ting sick is not an option in
this house, because that would
put my sister out of a job,
too,” she said.
Joel Begin, a union painter
in New Hampshire, also lost
his job on March 17, when au-
thorities shut down construc-
tion projects. He was able to
apply for unemployment bene-
fits but is struggling to make
ends meet. He said the pay-
ments account for about a
third of his regular income.
Oxford Economics projects
that by May, the U.S. will have
lost 27.9 million jobs and have a
16% unemployment rate, erasing
all the jobs gained since 2010
during the record-setting 113-
month stretch, which ended in
March. That job loss would be
more than double the 8.7 mil-sought to avoid job cuts and in-
stead asked employees to take
voluntary leave. Retailers cut
46,000 jobs.
There are signs job losses
are spreading across the econ-
omy. Health-care employment
declined by 43,000, with jobs
lost at dentists and physicians
offices. Some 19,000 day-care
jobs were cut. Employment in
temporary-help services fell by
50,000. Manufacturing em-
ployment was down 18,000.
Employment in construction
decreased by 29,000.
Jennifer Schellenberg, a 32-
year-old bartender at Minneap-
olis punk-rock venue Palmer’s
Bar, lost her job when Minne-
sota authorities shut down res-
taurants on March 17—St. Pat-
rick’s Day.
“Some people were hoping
for one last big payday,” she
said. “But from a public-health
standpoint, it’s not a good idea
to have a party day right before
everything shuts down.” The
$400 a week Ms. SchellenbergFriday to end the week with
modest declines after posting
the worst quarter since the fi-
nancial crisis. The Dow Jones
Industrial Average fell 360.
points, or 1.7%, while the S&P
500 fell 38.25 points, or 1.5%.
In March, more than half of
the jobs lost, 417,000, were at
restaurants and bars, among the
first businesses to close in ef-
forts to contain the pandemic.
The amount offset all the jobs
added in the sector over the
past two years. Hotels and
other tourism and hospitality
businesses cut 42,000 jobs.
Air-transportation jobs rose
slightly. In early March, airlines
Continued from page A
Joblessness
Rises Amid
Crisis
1–1million–1–2
’08 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17 ’18 ’19 ’84772747678882%21 ’5 ’1 ’15 ’2U.S.employerscut701,000jobsinMarchandtheunemploymentratejumpedto4.4%,itshighestlevelsinceAugust2017,theLabor
DepartmentreportedFriday.EconomistsexpectmorepaintocomeinAprilasmanyworkplacesremainclosedduetomeasures
aimedatstemmingthespreadofthenovelcoronavirus.HerearesomeofthekeytakeawaysfromtheMarchreport:
Laborforceparticipationdropped
sharplyinMarchevenforso-called
prime-agedworkers—ages25to54—
agrouplesslikelytobeoutofthelabor
forceduetoretirementoreducation.
Economistsexpectthisratetodrop
furthernextmonthasthecoronavirus
pandemicandrelatedlockdownsspread.Theshareofthepopulationinthe
U.S.laborforce—thosewhohold
orareactivelyseeking
jobs—droppedsharplyinMarch.
Theshareofthepopulationthat
worksalsotookahitafter
trendingupwardinrecentyears.BreakingDowntheJobsReport
By Harriet Torry and Anthony DeBarrosLABORFORCEPARTICIPATION PRIMEAGEPARTICIPATION
March'sjoblosseswereconcentratedinthehospitality
andretailsectors—whichincludemuseums,coffeeshops,
sportinggoodsstoresandautomobiledealerships—asmore
Americansstayedhomeamidthecoronaviruspandemic.SHARPESTLOSSESBYSECTOR
Theunemploymentratefor
Marchroseto4.4%from3.5%
inFebruary,thelargest
one-monthincreaseinthe
ratesinceJanuary1975.UNEMPLOYMENTRATEMOREJOBLOSSESEXPECTEDMonthychangeinnonfarmpayrollsAverageweeklywagestickedslightly
lower—likelybecausemanyworkers
sawtheirhourscut,whichwouldlower
weeklytotals.Averagehourlywages
roseslightly.Economistssaywages
tendtolagrecessionsandrecoveries,
andexpecttheApriljobsreporttogive
ableakerpictureonwages.ForecastingfirmOxfordEconomics
projectsthatbyMay,theU.S.will
havelost27.9millionjobsandhavea
16%unemploymentrate,erasingall
thejobsgainedsince2010duringthe
record-setting113-monthstretch,
whichendedinMarch.WAGEGROWTH
Unemploymentratestrendedupforworkersofall
racesandforbothmenandwomeninMarch.Thatisa
particularlypainfulsetbackforgroupsthathadonly
recentlybeguntoseetheirratesdroptorecordlows.JOBLESSNESSBYRACEANDGENDERTotalnonfarmpayrolls15512125131351414515million’8 ’1 ’12 ’14 ’16 ’18 ’2March
jobsreportEmployedEmployedShareofthepopulationthatis...6877256586626466%21 ’5 ’1 ’15 ’2Shareoftheprime-age(25-54years
old)populationthatis...Seasonally adjusted Seasonally adjustedPercentagechangeinjobs,FebruarytoMarchSightseeingtransportationFoodservicesFurniturestoresMiningsupportTextileproductmillsSportinggoods,books,otherstoresAccommodationRailtransportationClothingstores–1–1–1–1–2–3.–3.8%–1–1Heavy/civilengineeringconstruction –0.Thetotalnumberofnonfarmpayroll
jobswasup1%inMarchfromayear
earlierbecausetheonemonth’slosses
wereexceededbythegainsoverthe
prior11months.Stillthatgainmarked
aslowdownfromtheyear-over-year
paceinpreviousmonths.HIRINGHISTORYPercentchangeintotalnonfarm
jobsfromayearearlier
42%1 2 21 22Changeinaverageearnings
fromayearearlierSource: Labor Department624% change27 ’1 ’15 ’2WeeklywagesHourlywagesInflationrateUnemploymentratebyrace/ethnicity
andgender,age20andoverBlack Hispanic White25115%2 ’5 ’1 ’15 ’2 2 ’5 ’1 ’15 ’2Men Women1224681%17 ’8 ’ 2 ’1 ’2 Note: Sectors in the three-digit NAICS code level. Some names simplified.Seasonally adjustedRECESSIONSeasonally adjustedInthelabor
forceInthelabor
forceSeasonally adjusted.
Figures for February
and March 2020 are
preliminary.Seasonally adjusted. Wage figures
for February and March 2020 are
preliminary.Oxford
projectsnearly
28millionjobs
lost,thebulk
cominginAprilIn March, more than
half of the jobs lost
were at restaurants
and bars.nly.