Article Attachment

The attached file contains this articles commentary as well as tables and charts of the data.

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).

The Unemployment Rate ROSE by 10.3 percentage points in April to 14.7%, compared with market expectations for a small increase to 16.0%. Household employment fell by 22,369k while the labor force declined by 6,432k, resulting in an increase in the number of unemployed of 15938k.

The Labor Force Participation Rate FELL by 2.5 percentage points to 60.2%. The Employment-Population Ratio FELL by 8.7 percentage points to 51.3%.

The number of people Working Part-Time for Economic Reasons ROSE by 5,049k to 10,730k. while Long-Term Unemployment FELL by 225k to 939k (accounting for 4.1% of the unemployed), while the Mean Duration of Unemployment FELL by 11.0 weeks to 6.1 weeks.

There are now 23.1 million people officially unemployed. In addition, there are another 9,916k people who say they want a job but are not currently looking for one. Finally, another 10,730k people are working part-time because of slack economic conditions.

Hourly Earnings ROSE by 4.7% in April, above market expectations of 0.5%. Hourly earnings are now 7.9% ABOVE their year ago level.

Weekly Earnings also ROSE by 5.0%, the result of the change in hourly earnings and a longer workweek. Weekly earnings are now 7.3% ABOVE their year ago level.

The Average Workweek ROSE by 0.1 to 34.2 hours, ABOVE the market consensus at 34.1 hours.

The Index of Aggregate Hours FELL by 14.9%, combining the solid gain in private payroll employment and the longer workweek.

Article by Contingent Macro Advisors