By Thomas Cooley and Peter Rupert
The BLS announced that nonfarm payroll employment increased 4,800,000 in June. The largest increase was in private service producing, increasing 4,263,000. It should be noted however that COVID-19 has had a large impact on the measurement of labor market variables. In particular, the raw counts should be used with caution as there are potentially large misclassification issues. For example, the BLS writes:
In the establishment survey, workers who are paid by their employer for all or any part of the pay period including the 12th of the month are counted as employed, even if they were not actually at their jobs. Workers who are temporarily or permanently absent from their jobs and are not being paid are not counted as employed, even if they are continuing to receive benefits.
Initial claims have come down steadily although the continuing claims have not.
The bulk of the added jobs were in leisure and hospitality (2.1 million) as bars, restaurants and related business began to reopen. Many of these jobs may disappear again as some authorities begin to respond to the dramatic surge in Covid cases by shutting bars, restaurants and other services down again. Retail trade added 758,000 jobs. Education and health services accounted for 568,00 jobs and other services added 357,000 jobs. Many of these service sector jobs reflect re-allocation across firms – jobs lost in retail replaced by increased hiring at Amazon and Walmart. Some of them reflect recall from furlough to employment.
Manufacturing added 356,000 jobs after losing 757,00 since February. Most of these were in durable manufacture and the automotive sector.
Average hourly earning decreased by 1.2% reflecting the fact that the service sector jobs added or reactivated are the lower paid employees.
According to the household survey the labor force increased by about 1.7 million so that the labor force participation rate increased from 60.8 to 61.5. The number of persons unemployed fell by 3.2 million. However, again the BLS warns of data issues in terms of misclassification:
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 June) had been classified as unemployed on temporary layoff, the overall unemployment rate would have been about 1 percentage point higher than reported (on a not seasonally adjusted basis). However, this represents the upper bound of our estimate of misclassification and probably overstates the size of the misclassification error.
Moreover, the data are as recorded by the interviewers as per usual and the BLS has not altered the data to account for such misclassification…and rightly so.
The increase in employment and the fall in the unemployment rate will give optimists further hope for a V-shaped recovery. But the measured unemployment rate is a still staggering 11.1% as measured and is more likely higher. The unemployment rate including all marginally attached person, plus total employed part time for economic reasons declined from 22.8% in April to 21.2% in May and now sits at 18%.
