Employment: Better Than Expected, Mostly Due to Survey Issues
May 8, 2020
Bottom Line: Employers cut payrolls in April at an unprecedented rate, with payrolls dropping 20.5 million amid the shutdowns for the novel coronavirus. The sampling error and the reliance of surveying businesses, in the case of the payroll survey, in this environment makes the accuracy of this data given the magnitude of losses difficult. Additionally, surveys for this report were taken in the week that included April 12th -- there have been millions of new layoffs since then according to the jobless claims data. Payroll cuts were largest in the leisure and hospitality sector, as expected. Health services lost over 2 million payrolls as elective procedures dropped. Construction jobs fell less than 1 million as work continued through mid-April in some parts of the country. The unemployment rate rose sharply to 14.7%%, lower than expected, as the household employment report showed job losses of a stunning 22.5million, but the participation rate showed a decline of over 6 million people. The decline in participation rates was extremely large -- the more broad underemployment gauge, "U-6" was 22.8%. Finally, the average hourly earnings jumped the most on record. This should not be read as a positive -- it was almost entirely due to the job losses coming in the lower-paying segments of the economy. Overall, this report understates the devastation in labor markets in the month of April. Payroll Employment fell by 20.50 million in April, compared with market expectations for a decrease of 22 million. The prior 2 months were revised, lower in March by 169k and lower in February by 45k. Government jobs FELL by 980k. Consequently, private sector jobs FELL by 19520k. Overall employment is now -12.9% BELOW its year ago level.
- In April, the job gains were in Trade, Transportation & Utilities (-950k with -2,107k of those in Retail Trade), Professional & Business Services (-2,128k with a slip of 841.9k in Temp Help Services), Information (-254k), Financial Activities (-262k), Construction (-975k), Government (-980k), Other Services (-1267k), and Manufacturing (-1330k).
- Jobs were shed in Education & Health Services (-2,087k), and Leisure & Hospitality (-7,653k).
Article by Contingent Macro Advisors