{"id":1754,"date":"2020-06-05T10:28:10","date_gmt":"2020-06-05T14:28:10","guid":{"rendered":"https:\/\/naroffeconomics.com\/?p=1754"},"modified":"2020-06-05T10:28:10","modified_gmt":"2020-06-05T14:28:10","slug":"may-employment-report-4","status":"publish","type":"post","link":"https:\/\/naroffeconomics.com\/?p=1754","title":{"rendered":"May Employment Report"},"content":{"rendered":"\n

KEY DATA:<\/strong>  Payrolls: +2.5 million; Private: +3.1 million;\nRestaurants: +1.37 million\/ Unemployment Rate: 13.3% (down 1.4 percentage\npoints); Unemployed: -2.1 million<\/p>\n\n\n\n

IN A\nNUTSHELL:<\/strong>  \u201cThe road to recovery has begun.\u201d<\/em><\/strong><\/p>\n\n\n\n

WHAT IT\nMEANS:<\/strong>  Boy, did we get it wrong.  It was expected that May would be the last\nmonth of really ugly employment numbers, but the moves to reopen came faster\nand stronger than anticipated.<\/em><\/strong> \nInstead of another large decline in payrolls, the economy added 2.5\nmillion jobs.  The restaurant sector, which was\nlargely shuttered in March and April, started to reopen in May and added the\nmost numbers of workers.<\/em><\/strong>  With\ntake-out turning into eat-in this month, those gains should accelerate. Keep in\nmind, in February, there were 12.3 million workers in this sector but in May,\nthe total was still only 7.6 million, meaning a lot of workers still need to be\nrehired.  Big increases were also seen in\nconstruction, retailing, manufacturing, health care and administrative\nservices.<\/em><\/strong>  As far as weak links go, the\nmajor one was state and local governments<\/em><\/strong>, which cut over 570,000\nworkers.  The education sector was\ndecimated<\/em><\/strong> and that raises serious concerns for schools in\nSeptember.  As for the private sector, airlines\ncontinued to reduce employment significantly. \n<\/em><\/strong>One final note: Despite the large addition to payrolls, there\nwere still 19.6 fewer jobs in May than in February.  That is the hole we have to dig out of. <\/p>\n\n\n\n

On the unemployment front, the news was way better\nthan expected as well.  Despite the large\nnumber filing for unemployment insurance in May, the callbacks overwhelmed the\nlayoffs and the unemployment rate dropped.<\/em><\/strong>  Keep in mind, the rate is still nearly ten\npercentage points above where it was in February and well above the 10% peak\nduring the Great Recession, so we have a long way to do to get back to where we\nwere.<\/em><\/strong>  The number of people\nemployed rose by nearly four million, half of those coming from the unemployed\nrolls and half from people who had dropped out of the labor force.  Though the so-called \u201creal\u201d unemployment rate\nremained above twenty percent, about a third of that rate came from workers\nemployed part-time for economic reasons. That could be due to the partial re-opening\nof restaurants.  The move back toward at\nleast some eat-in arrangements should cut into that number sharply in the\nmonths to come.  <\/p>\n\n\n\n

IMPLICATIONS:<\/strong>  The reopening of the economy is starting and\nthe first clear sign is in employment. \nGiven the massive and widespread shut downs, it was assumed we would see\nsome really big increases, it\u2019s just that they started happening a month earlier\nthan expected.  Don\u2019t be surprised if the\nJune report is even better. <\/em><\/strong> Thus, those who forecast a third quarter\neconomic decline of up to forty percent will likely be revising their numbers dramatically.  I was near the bottom of the panels with\n-22%, but that may be too large.  However,\nwe\nknew that the first few months of recovery would be really robust.  That it came in May and June instead of later\nis a timing issue.  Instead of an\nhistoric, massive decline in the second quarter, it will be only huge.  That means the third quarter growth rate will\nbe large not massive.  <\/em><\/strong><\/p>\n\n\n\n

I have argued over the past few months that what\nmatters is not the third quarter growth rate but what happens once we get past\nthe initial phase of re-openings and government supported hiring and income\nsupports.  That is, once the economy has\nto stand on its own.<\/em><\/strong>  The continued high levels of\nunemployment claims and the likelihood of continued cut backs in government\npayrolls argues that we have to be cautious about thinking we can\nget back to the pre-virus shutdown economy quickly<\/em><\/strong>.  The extra $600 per week unemployment add-on\nand the business subsidies are slated to end this summer and we saw in the\nincome report that government transfer payments have supported income\ngrowth.  This report makes it harder to\nargue the government should go further into debt if the economy is already\nrecovering.  Once government support is\nwithdrawn, though, one critical driver of the recovery will disappear and that\ncould slow growth. <\/em><\/strong> Let\u2019s be\nrealistic, there will be a lot of firms that have been permanently damaged or\nwho will be operating at lower levels than they were pre-virus for an extended\nperiod. You don\u2019t shut down an economy for two months and think there will be\nno long-term impacts.  Let\u2019s enjoy the\nfact that we are starting to recover and the short-term looks good, but the long-term\npath remains uncertain.    <\/em><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

KEY DATA:  Payrolls: +2.5 million; Private: +3.1 million; Restaurants: +1.37 million\/ Unemployment Rate: 13.3% (down 1.4 percentage points); Unemployed: -2.1 million IN A NUTSHELL:  \u201cThe road to recovery has begun.\u201d WHAT IT MEANS:  Boy, did we get it wrong.  It was expected that May would be the last month of really ugly employment numbers, but … Continue reading May 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":[1],"tags":[],"class_list":["post-1754","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"_links":{"self":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1754","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=1754"}],"version-history":[{"count":1,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1754\/revisions"}],"predecessor-version":[{"id":1755,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1754\/revisions\/1755"}],"wp:attachment":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1754"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1754"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1754"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}