COVID-19 has taken a toll on human lives as well as the global economy, with the latest US employment figures revealing a shocking number of job losses in April. Franklin Templeton Fixed Income CIO Sonal Desai weighs in on the situation, saying the next few weeks will likely prove crucial in shaping the course of the labor market for the remainder of this year.

As the April US employment numbers came in, I could not help shaking my head in disbelief at what our labor market is going through.

The April jobs report has brought home the catastrophic impact that the lockdown has inflicted on US workers. Non-farm payrolls suffered the largest decline on record, falling by 20.5 million and bringing employment back to early-2011 levels. The unemployment rate jumped by more than ten percentage points to 14.7%, corresponding to 16 million more unemployed people. The broader “U6” measure, which includes workers marginally attached to the labor force or working part time for economic reasons (namely unable to find full-time work), jumped to nearly 23%.

In the 2009 Great Recession, those two rates had peaked at 10% and about 17% respectively. Most of the decline was in the services sector, especially leisure and hospitality (-7.7 million), but manufacturing and construction also suffered a heavy blow.

Shocking as they are, these numbers are not surprising, considering we had already seen initial jobless claims climb to over 33 million, and continuing claims to almost 23 million as large parts of the US economy were shut down in March and remained close throughout April. Partly because of this, financial markets seem to have taken the headline numbers in stride, with equity indexes rising by the end of the day Friday.

Investors are probably also heartened by the fact that some US states have begun to reopen their economies; equity markets are also likely building in the expected impact of the massive monetary policy expansion on asset prices, as we have seen in the reaction to previous crises.

Don’t let the financial markets’ reaction fool you, however. The labor market has suffered a tremendous blow, and now faces a formidable challenge to rebuild jobs and livelihoods. To get the full sense of the damage, consider the following: while the ranks of the unemployed swelled by 16 million people, once we add workers marginally attached to the labor force or working part time for economic reasons, we get to almost 22 million jobs lost—broadly equal to the decline in employment. To these numbers we must add the roughly 6.4 million people who exited the labor force.

And finally, we have seen a sharp increase (about 5.5 million) in workers classified as “working but absent from work”: they remain attached to their employers but are not actively working. This brings us to close to 34 million people—broadly in line with the 33 million who filed jobless claims.