Friday, May 08, 2020

Comments on April Employment Report

by Calculated Risk on 5/08/2020 10:35:00 AM

The April report was the worst monthly report ever in terms of job losses and the increase in the unemployment rate. The headline number for April was 20,500,000 jobs lost, and the previous two months were revised down 214 thousand, combined. The unemployment rate increased to 14.7%.

The BLS noted that the actual unemployment rate was probably close to 20%:

"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)."
In addition, the job losses are ongoing. There will be millions more job losses in May, and when the PPP ends - after eight weeks - many of those workers will also become unemployed. It is very likely that the unemployment rate at the peak will exceed the worst of the Great Depression (25%). The key will be how well the virus is suppressed, and that will determine how quickly the economy recovers.

Earlier: April Employment Report: 20,500,000 Jobs Lost, 14.7% Unemployment Rate

In April, the year-over-year employment change was minus 19.42 million jobs.

One of the keys to follow will be the number of workers on temporary layoff. This increased from 801 thousand in February, to 1.848 million in March, and to 18.063 million in April. If these temporary layoffs become permanent, then that will be worse for the eventual job recovery.

Prime (25 to 54 Years Old) Participation

Employment Population Ratio, 25 to 54Click on graph for larger image.

Since the overall participation rate has declined due to cyclical (recession) and demographic (aging population, younger people staying in school) reasons, here is the employment-population ratio for the key working age group: 25 to 54 years old.

The prime working age will be key in the eventual recovery.

The 25 to 54 participation rate decreased in April to 79.9%, and the 25 to 54 employment population ratio decreased to 69.7%.

Part Time for Economic Reasons

Part Time WorkersFrom the BLS report:
"The number of persons at work part time for economic reasons nearly doubled over the month to 10.9 million. These individuals, who would have preferred full-time employment, were working part time because their hours had been reduced or they were unable to find full-time jobs."
The number of persons working part time for economic reasons increased sharply in April to 10.730 million from 5.681 million in March.

These workers are included in the alternate measure of labor underutilization (U-6) that increased to 22.8% in April. This is the record high for this measure (since 1994). The previous peak was 17.2% during the Great Recession.

Unemployed over 26 Weeks

Unemployed Over 26 WeeksThis graph shows the number of workers unemployed for 27 weeks or more.

According to the BLS, there are 939 thousand workers who have been unemployed for more than 26 weeks and still want a job. This was the lowest level since 2001, probably because many long term unemployed just gave up looking in April. This will increase sharply in 5 or 6 months, and will be a key measure to follow during the eventual recovery.

Summary:

The headline monthly jobs number was the worst ever, and the previous two months were revised down.  The headline unemployment rate increased to 14.7% (probably closer to 20%).   These are horrible numbers, and there is more bad news to come.