The Employment Outlook

There’s always a story behind the economic data. The Employment Report understated the labor market deterioration in March, while seasonal adjustment amplified the level of job losses in the first half of the month. More importantly, claims for unemployment benefits doubled from the astronomical level of a week earlier. On a seasonally adjusted basis, nearly 10 million people, more than 6% of the labor force, have filed a jobless claim in just two weeks, more than in the first six months of the 2007-09 recession. The speed and magnitude of this decline are unprecedented, and we’re not close to being done yet.

The payroll survey covers the pay period that includes the 12th of the month, and so it is biased toward conditions in the first half of the month. In March, the total failed to capture the sharp weakness seen in the final two weeks. However, seasonal adjustment is also an issue. Prior to seasonal adjustment, nonfarm payrolls fell by 251,000. However, if not for COVID-19, we would have expected a gain of about 700,000. The seasonal adjustment turns that into a 701,000 decline. Most of the weakness was in restaurants, down 417,400 (-275,000 before adjustment). Temp-help payrolls fell by 49,500 (-22,700 before adjustment). Construction fell by 29,000 (+60,000 before adjustment). Hiring for the census was 17,000 (with more to come in April and May).

Scott Brown
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The concentration of weakness in the March employment report generated a number of anomalies. High job losses in lower-paying, fewer-hours industries lifted average hourly earnings (up 0.4% m/m, +3.1% y/y) and limited the decline in average weekly hours (34.2, vs. February’s 34.4).

Job losses were also more significant for younger workers. The unemployment rate for teenagers rose to 14.3% (vs. 11.0% in February) and the rate for young adults (aged 20-24) rose to 8.7% (from 6.4%). The unemployment report for prime-age workers (aged 25-54) rose to 3.6% (from 3.0%). For older workers (aged 55+), the rate rose to 3.3% (from 2.6%). The broad U-6 measure, which includes discouraged workers (not included in the labor force, but wanting a job) and those working part time but wanting full-time employment, rose to 8.7% (from 7.0%). Still, we can be sure that the April figures (to be reported on May 8) will be much worse.