Payroll Employment Trends across the Fifth District

Introduction

Since the COVID-19 pandemic began to force businesses to temporarily close, lay off workers, or reduce hours, unemployment data have become a key indicator of the pandemic’s impact on the economy. Initial unemployment insurance (UI) claims spiked during the week of March 28 at over 6.8 million, and more than 20 million initial claims were made during the entire month of April in the U.S. The unemployment rate also surged from a 50-year low of 3.5 percent in March to 14.7 percent in April, the highest rate since the Great Depression.

Yet while initial UI claims and the unemployment rate provide a sense of the pandemic’s impact on the economy, they do not highlight how different industries and sectors of the economy have been affected. This Regional Matters post examines the pandemic’s impact in terms of payroll employment, both throughout the U.S. and within the Fifth District. Additionally, it examines recent variations in payroll employment trends among Fifth District jurisdictions that could be attributed to differences in phased reopening dates.

Decline and Recovery throughout the U.S.

Many nonessential businesses and workers began to feel the effects of COVID-19 by the middle and end of March with the implementation of stay-at-home orders. However, the March jobs report from the Bureau of Labor Statistics only showed a slight increase in the unemployment rate to 4.4 percent, according to the household survey. According to the establishment survey, total nonfarm payroll declined by about 1.4 million. The April report, on the other hand, was much more indicative of the pandemic’s impact, as the unemployment rate increased by 10.3 percentage points and total nonfarm payroll declined by over 20 million.

In terms of total job loss, the three hardest-hit industries throughout the U.S. were leisure and hospitality, trade, transportation, and utilities, and education and health services. Within leisure and hospitality, accommodation and food services experienced the harshest impact by far. During March and April, over 6.9 million jobs were lost, representing almost half of the jobs in the industry prior to the pandemic. In the trade, transportation, and utilities industry, retail trade experienced the second-highest decline in payroll employment behind accommodation and food services; 2.3 million retail jobs were lost (15 percent of industry employment in February). Within education and health services, health and social services in particular lost 2.2 million jobs (11 percent of industry employment in February). Other industries, such as construction and other services, saw a higher percentage of job loss than retail trade and health and social services, yet these industries make up much smaller segments of the labor market.

Decline within the Fifth District

A recent Regional Matters post highlighted the makeup of the Fifth District’s economy in comparison with the entire U.S. As the authors noted, “there is little about the structure of the Fifth District economy to indicate that we will be affected differently than the U.S. as a whole.” For the most part, this expectation holds true when examining job losses across the Fifth District in the three most heavily affected industries. However, a few noticeable differences did show up in terms of the degree of jobs lost, especially in leisure and hospitality. As shown in the chart below, the District of Columbia and West Virginia in particular experienced a far higher percentage of job loss than the U.S. in this industry (56 and 53 percent, respectively). 

Phased Reopening and Recovery within the Fifth District

In late April and early May, Fifth District jurisdictions began reopening their economies in an effort to mitigate further harmful economic effects of the pandemic. West Virginia was the first to lift restrictions on April 30 and has since executed a fast-paced reopening plan allowing more businesses to reopen every week. On May 4, South Carolina implemented its own reopening plan that included no limits on social gatherings, no capacity limits on nonessential retail stores, and allowed 50 percent capacity in restaurants. All other jurisdictions, however, have carried out much slower phased reopenings of their economies. The matrix below details each jurisdiction’s reopening timeline and status as of July 1. 

Source: State government websites

Although it is not a directly causal relationship, we might expect jurisdictions that have opened sooner or faster to have recovered more when analyzing payroll data. As of this writing, June state-level data are not yet available and will be released on July 17. Still, based on the percentage of jobs regained in May that were lost during March and April, we do see some relationship between jurisdictions’ phased reopening dates and their job recovery. Specifically, South Carolina regained 23 percent of previous total job losses, while West Virginia regained 14 percent. Third in line was North Carolina, which regained 11 percent of total job losses. In leisure and hospitality, South Carolina and West Virginia regained 26 and 22 percent of jobs lost, respectively, and North Carolina regained 17 percent. The two other hardest-hit industries tell a more nuanced story. In trade, transportation, and utilities, as well as education and health services, North Carolina and South Carolina regained a significantly higher percentage of jobs than all other Fifth District jurisdictions. On the other hand, West Virginia’s resurgence in these industries did not stand out.

Conclusion

In addition to the information provided by UI claims data and the unemployment rate, payroll data reveal the pandemic’s effect on specific sectors of the labor market. When segmenting the data by industry, we observe that only a few industries accounted for the majority of job losses in March and April. Although many private sector industries began to recover during May and June, the public sector lagged behind and continued to suffer job losses. Additionally, differences in phased reopening dates among Fifth District jurisdictions exhibit some relationship with these recovery trends. Notably, the establishment survey data refer to the pay period that includes the 12th of each month, which was before Maryland, the District of Columbia, and Virginia began their phased reopenings. Because of this, we may expect these particular jurisdictions to exhibit larger rebounds in June than they did in May in the hardest-hit industries, as all Fifth District jurisdictions are now in at least phase two of their respective reopening plans. More answers will be provided when the June state-level data are released on July 17.

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Views expressed are those of the authors and do not necessarily reflect those of the Federal Reserve Bank of Richmond or the Federal Reserve System.