The Job Market

The April Employment Report was flawed, reflecting issues with data collection, classification, and methodology. However, results were consistent with an unprecedented, sharp deterioration in labor market conditions, mostly at the lower rungs. Payrolls fell by more than 20 million, nearly erasing the number of jobs gained since the financial crisis. The unemployment rate jumped to 14.7%, but that understated the problem. Correcting for a classification issue, the figure would have been closer to 20%. So many lower-income workers were jettisoned in April, average hourly earnings surged. None of this tells anything about where we’re going. While many are hoping for an economic rebound, recovery will take time and there is going to some permanent job destruction.

Nonfarm payrolls fell by 20.5 million in the initial estimate for April, the largest decline on record, dwarfing the amount of job losses during the financial crisis. Private-sector jobs were down 14.5% from a year earlier. Leisure and hospitality lost 7.65 million in April, down 48% in the last two months (5.49 million of that in restaurants). Manufacturing shed 1.3 million jobs. Construction lost 975,000. Retail jobs fell by 2.1 million. Temp- help payrolls fell by 842,000 (-30.9% y/y). State and local government lost 981,000 jobs, about two-thirds in education (in comparison, we lost about 700,000 state and local government jobs in total during the financial crisis).

Scott Brown
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In a normal April, we would expect to add around one million jobs. Prior to seasonal adjustment, payrolls fell by 19.5 million. The Bureau of Labor Statistics uses a birth/death model to account for business creation and destruction. This model does well in normal circumstances, but tends to miss badly at turning points. The model would have added 246,000 to the unadjusted payroll total, but the BLS adjusted that to -553,000 to account for the effects of COVID-19. Annual benchmark revisions will eventually correct that, but why worry about the nearest million or so at this point.