{"id":1729,"date":"2020-05-08T10:52:54","date_gmt":"2020-05-08T14:52:54","guid":{"rendered":"https:\/\/naroffeconomics.com\/?p=1729"},"modified":"2020-05-08T10:52:54","modified_gmt":"2020-05-08T14:52:54","slug":"april-employment-report-2","status":"publish","type":"post","link":"https:\/\/naroffeconomics.com\/?p=1729","title":{"rendered":"April Employment Report"},"content":{"rendered":"\n

KEY DATA:<\/strong>  Payrolls: -20.5 million; Private: -19.5\nmillion; Manufacturing: -1.3 million; Leisure and Hospitality: -7.7 million; Health\nCare: -2.1 million; Retail: -2.1 million\/ Unemployment Rate: 14.7%; Labor\nForce: -6.4 million; Unemployed: +15.9 million<\/p>\n\n\n\n

IN A\nNUTSHELL:<\/strong>  \u201cThe employment declines were historic and the\nunemployment rate hit a post WWII record, so it is hard to find anything good\nin this report.\u201d<\/em><\/strong><\/p>\n\n\n\n

WHAT IT\nMEANS:<\/strong>  Welcome to the world of pandemic economic\nnumbers and they aren\u2019t very pretty.  The\nApril employment report was expected to set records and it did.<\/em><\/strong>  Let\u2019s start with the jobs situation.  The 20.5 million payroll decline was the\nlargest for any single month or year.  <\/em><\/strong>The\ndeclines were so broad based that fewer than five percent of the 258 private\nindustries posted a payroll gain.  Even\nat the worst point in the Great Recession, over fifteen percent of the\nindustries posted gains.  The\nloss leaders were, as expected, leisure and hospitality, retail and\nmanufacturing. Health care took a huge hit and that included hospitals.<\/em><\/strong>  Emergency\/Covid-19 care requirements could\nnot overcome the loss of demand for every other type of health care service as\npeople stopped going to doctors and dentists, except in emergencies.  The only private sector industry that posted\na rise of any significance was retail warehouses, such as Costco and BJs.<\/em><\/strong>  Otherwise, it was basically all red.  There was also a data calculation issue.<\/em><\/strong>\nBLS noted that, \u201cBusiness births and deaths cannot be adequately captured by\nthe establishment survey as they occur\u201d. \nI suspect that in this shuttered economy, the death rate is a lot higher\nthan normal while the birth rate is significantly lower. That implies a larger\ndecline in total payrolls than estimated. \nBut the estimation process could not capture that change in behavior, so\nconsider the job loss a lower bound.  The\nreal job loss number was likely a lot higher, though it is impossible to know\nby how much. <\/em><\/strong><\/p>\n\n\n\n

As for the unemployment rate, it did not rise to as\nhigh a level as projected<\/em><\/strong>.  But\nthat was due to the some special circumstances. \nFirst, the labor force collapsed.<\/em><\/strong>  Over the past two months, 8.1 million people\nhave left the labor market and most of those workers are likely\nunemployed.  They just didn\u2019t see any\nreason to look for jobs since there weren\u2019t any, so they were not counted as\nunemployed.  That alone could have added almost\nfive percentage points to the rate.<\/em><\/strong> \nThere were other data collection\/identification\/classification issues\nas well<\/em><\/strong>, including rules that determine how to determine whether a\nperson who is not working is employed or unemployed.  In a special comment in the report, BLS\nnoted<\/em><\/strong> the data collection and identification issues and pointed out\nthat \u201cIf the workers who were recorded as employed but absent from work due\nto \u201cother reasons\u201d <\/strong>(over and above the number absent for other reasons in a\ntypical April) had been classified as\nunemployed on temporary layoff, the overall unemployment rate would have been\nalmost 5 percentage points higher than reported<\/strong> (on a not seasonally\nadjusted basis)\u201d.<\/em>  Simply\nput, the 14.7% rate is a lower bound and the \u201creal\u201d number is probably close to\n20%.<\/em><\/strong>  Indeed, the so-called \u201creal\nunemployment rate\u201d was 22.8%.  This\nincludes people who gave up looking for jobs, which is a real issue now.  <\/p>\n\n\n\n

There were a couple of other interesting (odd?) numbers in the report.\u00a0 The average hourly wage soared by 4.7%, compared to a couple of tenths that is normal.\u00a0 Also the workweek rose.\u00a0 It looks like low-income workers bore the brunt of the job losses and people who could continue working either picked up hours or if they worked from home, kept their hours.\u00a0 Finally, the labor force participation rate fell to its lowest level since January 1973<\/em><\/strong>.\u00a0 That was the start of the Baby-Boomers surge into the labor force. <\/p>\n\n\n\n

IMPLICATIONS:As bad as the data were in April, the problems with classification and collection, as well as the continued surge in jobless claims, indicate that the job loss and unemployment numbers were lower bounds, not accurate measures of what really is going on.It is likely that the May unemployment rate will approach if not exceed 20%,<\/em><\/strong> that it probably was already in April. I would not be surprised if investors are celebrating the lower than expected unemployment rate, but if they are doing so, they are misreading the data.\u00a0 But there is a threat to the markets from the underestimation of the unemployment rate due to the declining labor force.\u00a0 Once the economy starts reopening and job losses fade, the workers who left the labor market will start returning.\u00a0 That would slow the decline in the unemployment rate.\u00a0 If investors are expecting a rapid drop in the rate, they are likely to be greatly disappointed.<\/em><\/strong>\u00a0 And once the data collectors start getting more information on births and deaths, we will probably see job gains grow more slowly, as bankruptcies are likely surging.\u00a0 The point is that the labor market is in even worse shape than these terrible numbers indicate, which as I have noted before, means it will take longer to dig ourselves out of this hole.\u00a0 <\/p>\n","protected":false},"excerpt":{"rendered":"

KEY DATA:  Payrolls: -20.5 million; Private: -19.5 million; Manufacturing: -1.3 million; Leisure and Hospitality: -7.7 million; Health Care: -2.1 million; Retail: -2.1 million\/ Unemployment Rate: 14.7%; Labor Force: -6.4 million; Unemployed: +15.9 million IN A NUTSHELL:  \u201cThe employment declines were historic and the unemployment rate hit a post WWII record, so it is hard to … Continue reading April Employment Report<\/span> →<\/span><\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[],"class_list":["post-1729","post","type-post","status-publish","format-standard","hentry","category-economic-indicators"],"_links":{"self":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1729","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1729"}],"version-history":[{"count":1,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1729\/revisions"}],"predecessor-version":[{"id":1730,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1729\/revisions\/1730"}],"wp:attachment":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1729"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1729"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1729"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}