Bank of America forecasts a 'shocking' 22 million jobs lost in April, unemployment spike to 15%

• Friday's April jobs report should go down in infamy, Bank of America economists wrote in a Wednesday note.
• The bank forecasts Friday's jobs report will show a "shocking loss" of 22 million jobs in April and expects the unemployment rate to jump to 15% from 4.4% in March.
• Bank of America's base case of 15% unemployment rate is consistent with about 70% of jobless workers being classified as "unemployed" and the remaining 30% counted as leaving the labor force.
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The April jobs report, due Friday from the Labor Department, should go down in infamy, according to economists at Bank of America.

The bank forecasts that the report will show a "shocking loss" of 22 million jobs in April and expects the unemployment rate to jump to 15% from 4.4% in March.

"The April employment report will reveal unprecedented job losses as the economy has been shut down to control the spread of COVID-19," a group of economists led by Alexander Lin wrote in a Wednesday note.

Economists across the board expect that the Friday report from the Bureau of Labor statistics will be one of the worst amid the coronavirus pandemic. On Wednesday, the April ADP report showed that private payrolls declined by 20.2 million in the month, a new record. The ADP monthly report is a harbinger for the jobs report from the government.

The bank also noted that the unemployment rate should be viewed in context of labor force participation, as the rate will depend on how many workers are classified by the Bureau of Labor Statistics as "unemployed" versus "not in the labor force."

Bank of America's base case of 15% unemployment rate is consistent with about 70% of jobless workers being classified as "unemployed" and the remaining 30% counted as leaving the labor force. This would bring the participation rate to 60%.

"Large increases in unemployment will keep the participation rate relatively steady," Lin wrote. "But a much lower-than-expected unemployment rate might not be reason to cheer as it will probably be accompanied by a collapse in labor force participation."

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Bank of American also expects average weekly hours will plunge to a new record low of 33.5. This may boost wage growth by as much as 1%, but this is because the workers most impacted by the coronavirus layoffs have been low-to-medium wage earners, according to the report.

Payroll losses are likely to be concentrated in the states that have accounted for the largest shares of jobless claims, according to Bank of America. That means that California, Pennsylvania, and New York will likely make up the bulk of losses.

Economists will also be watching for what industries are experiencing layoffs to gauge how widespread devastation from the outbreak is in the labor market. In the first week of record jobless claims, the accommodation and food services sector was hit the hardest.

But since, pain "spread into other sectors like retail trade, healthcare & social assistance, and manufacturing, with those sectors' shares of initial claims rising above 10%," Lin wrote.

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