By Thomas Cooley and Peter Rupert
As expected, the US economy experienced a devastating collapse in the labor market. Payroll employment fell 20.2 million according to the BLS. It is nearly impossible to compare the magnitude to anything in the past. As seen below, it now makes it nearly impossible to discern differences in graphs. Looking at a long history, as in the employment differences graph beginning before WWII shows only small wiggles as the scale has to be changed to accommodate recent events. All major sectors felt the shock. What is most striking from this sudden collapse is the speed at which the labor market has plunged.
A surprising feature of this report is that average hourly earnings increased by 7.9% Y/Y, but this was simply an artifact of the fact the so many low wage workers lost their jobs. It was pure carnage for those in the most vulnerable occupations and also led to the unemployment rate of teens 16-19 rising to its highest level ever recorded. The same forces affected the average weekly hours.
The household survey from the BLS also shows unprecedented changes. The number of unemployed persons now is over 23 million. However, looking at the initial claims data there has been about 33 million individuals claiming unemployment insurance since March 21. The report also includes a disclaimer saying that the response rate for the household survey plunged last month and the payroll survey required an adjustment. This suggests we should should expect big revisions to all these numbers in the coming reports as the BLS tries to fill in the blanks. They won’t be happy revisions!
The BLS is candid in it’s report about the shortcomings of the data for this month:
“….. there was also a large increase in the number of workers who were classified as employed but absent from work. As was the case in March, special instructions sent to household survey interviewers called for all employed persons absent from work due to coronavirus-related business closures to be classified as unemployed on temporary layoff. However, it is apparent that not all such workers were so classified. If the workers who were recorded as employed but absent from work due to “other reasons” (over and above the number absent for other reasons in a typical April) had been classified as unemployed on temporary layoff, the overall unemployment rate would have been almost 5 percentage points higher than reported (on a not seasonally adjusted basis). However, according to usual practice, the data from the household survey are accepted as recorded. To maintain data integrity, no ad hoc actions are taken to reclassify survey responses.”
The coming months will bring the full extent of the carnage into sharper focus. Until then we can only hope that the CARES Act and other programs will slip a safety net under these unfortunate workers.