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Consumer sector pummeled in wave of US job losses in April


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Consumer sector pummeled in wave of US job losses in April

Restaurants and retailers continue to be among the industries hit hardest by U.S. job losses amid the coronavirus pandemic as business shutdowns, layoffs and furloughs drove unemployment to new highs in April.

Retail trade, leisure and hospitality industries accounted for 9.8 million of the 20.5 million jobs shed across the broader economy during the month as stay-at-home orders and closures of nonessential businesses pushed jobless numbers from 870,000 in March, according to data from the Bureau of Labor Statistics.

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In the consumer industry, leisure and hospitality saw the greatest rate of decrease, with a month-over-month decline of 46.76%, or 7.7 million jobs, to 8.7 million.

Food services and drinking places, a sector within leisure and hospitality, dropped 5.5 million jobs during the month. Restaurants have shed nearly three times more jobs than any other industry since the start of the outbreak, the National Restaurant Association said in a note.

The retail sector lost 2.1 million jobs during the month, with clothing and clothing accessories stores leading the decline with a loss of 739,600 jobs, or a 58.25% drop.

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According to the U.S. Labor Department, temporary layoffs accounted for about 87.6% of the job losses reported in April.

Many U.S. companies, including Royal Caribbean Cruises Ltd., Best Buy Co. Inc., The Gap Inc., J. C. Penney Co. Inc. and Macy's Inc. have furloughed or laid off thousands of workers in recent weeks in response to the coronavirus crisis.

Gregory Daco, chief U.S. economist at Oxford Economics, said via email that the majority of the job losses were classified as unemployed individuals on "temporary layoffs." This indicates that many workers remain attached to their employers and are likely to return to work as the economy reopens.

"Overall, while roughly 88% of all unemployed are considered on 'temporary layoffs', we fear many will verse into the permanent job losses category," Daco said.

Economists warn that recovery will be slow once states start to reopen. "I actually think the rebound will be very slow," Daco said.

Erica Groshen, ex-commissioner of the Bureau of Labor Statistics, said in a post that 79% of the people on temporary layoffs have maintained relationships with their employers. That should help speed the recovery once restrictions lift, she said.

"However, this alone cannot guarantee a rapid recovery, because ties can weaken over time, some employers will not survive long enough to recall their workers, and other employers may need a new business model with different staffing requirements," said Groshen, now a senior extension faculty member at the Cornell University School of Industrial and Labor Relations.

The Gap on May 6 detailed plans to reopen some of its stores as more companies seek to restart operations on a limited basis. Kohl'sKohl's Corp. and Ulta Beauty Inc. also announced plans to reopen stores in some U.S. states.

Still, April's numbers confirm that "the labor market is in free fall, undoing years of economic progress," Shai Akabas, director of economic policy at the Bipartisan Policy Center, said. "Unfortunately, we already know it gets worse from here. Because of the survey's timing, these data give a snapshot of the labor market from three weeks ago."

The Labor Department conducted the surveys during the week of April 12. Because that survey period ended in the middle of the month, some worry that the report "does not fully capture the level of joblessness in the country," Lindsey Piegza, chief economist at Stifel, said in a note.

Piegza added that the report is a "reminder of the devastating impact of the policies put in place to contain COVID-19, essentially shutting down entire sectors of the economy."

The jobs data follows the Labor Department's weekly claim report. Unemployment claims in the U.S. totaled 3.17 million in the week ended May 2, pushing the total number of unemployment claims to about 33.5 million over the last seven weeks.

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Elise Gould, senior economist at the Economic Policy Institute, said payroll employment "dropped like a rock" in April.

"I struggle to even put into words how large this drop is," Gould said in a May 8 report, adding: "Total job losses over the last two months would fill all 30 currently empty Major League Baseball stadiums 16 times over."