US companies cut 27,000 jobs before the worst of the coronavirus shutdown, millions more coming, Moody’s says

Companies reduced payrolls by 27,000 in early March before the worst of the coronavirus-induced economic freeze, according to a report Wednesday from ADP and Moody’s Analytics.

Actual losses for the month were far worse as indicated by the millions of people who already have filed unemployment claims. Wednesday’s report covers the period through March 12.

It was the first time the private payroll count had contracted in 10 years, and total job losses probably will total 10 million to 15 million, said Mark Zandi, chief economist at Moody’s. 

“It’s been 10 straight years of consistent, solid job growth, and the virus has put an end to that,” Zandi said on a media conference call.

“Much bigger job losses are coming,” he added.

Just 6% of companies indicated they are hiring, a level worse than during the financial crisis and comparable to about 40% for a typical month, Zandi said.

Economists surveyed by Dow Jones had forecast a loss of 125,000 jobs. However, the March ADP count as well as Friday’s nonfarm payrolls report cover periods before the government instituted social distancing measures that have shut down large parts of the U.S. economy. 

The March ADP number comes after a February gain of 179,000, revised lower from the initially reported 183,000.

The only employment numbers that are measuring the coronavirus impact in somewhat real time are the weekly initial jobless claims counts. Last week, first-time claims numbered nearly 3.3 million and are expected to show another 3.1 million when that number comes out Thursday.

The ADP count does show, however, that companies already were beginning to cut in a labor market that had been roaring.

Small businesses accounted for all of the reductions, slicing 90,000 from payrolls, with 66,000 of those reductions coming from companies that employ 25 people or less. 

Medium-sized businesses, with between 50 and 499 employees, added 7,000 while big companies hired 56,000.

The biggest job reductions came from trade, transportation and utilities (-37,000), followed by construction (-16,000) and administrative and support services (-12,000). Professional and technical services added 11,000 positions while manufacturing rose by 6,000.

In broad terms, service-related industries saw losses of 18,000 while goods producers dropped 9,000.

The ADP report generally serves as a precursor to the more closely watched nonfarm payrolls report, though the March government tally also will take less relevance because its reference period covers through March 12, the same as ADP. Economists surveyed by Dow Jones expect the Labor Department’s count for March to show a loss of 10,000 after February’s gain of 273,000.

Estimates for how bad coronavirus-related job losses will be vary widely. The St. Louis Federal Reserve has forecast as many as 47 million layoffs and an unemployment rate that would top out at 32%, though most other forecasts have been less dire.

Zandi identified some 70 million jobs that are considered “quite vulnerable” to layoffs, including 33 million at “very high risk” and 37 million at “significant risk.”