Total Employment Falls to Near 20-Year Low. It Will Likely Take Years to Recover.
As predicted by many, April's employment numbers were the worst ever recorded since the US government began making these estimates in 1939.
The US Bureau of Labor Statistics (BLS) released new estimates this morning, and unemployment surged to 14.4 percent. That's below the Great Depression high of 24.9 in 1933, but it's above the early 1980s depression peak of 11.3 percent.
According to the BLS report:
In April, the unemployment rate increased by 10.3 percentage points to 14.7 percent. This is the highest rate and the largest over-the-month increase in the history of the series (seasonally adjusted data are available back to January 1948). The number of unemployed persons rose by 15.9 million to 23.1 million in April. The sharp increases in these measures reflect the effects of the coronavirus pandemic and efforts to contain it.
In April, unemployment rates rose sharply among all major worker groups. The rate was 13.0 percent for adult men, 15.5 percent for adult women, 31.9 percent for teenagers,14.2 percent for Whites, 16.7 percent for Blacks, 14.5 percent for Asians, and 18.9 percent for Hispanics. The rates for all of these groups, with the exception of Blacks, represent record highs for their respective series.
Total employment crashed to a near twenty-year low as more than 20 million jobs were lost in the wake of the COVID-19 panic and numerous government-imposed "lockdowns" on the economy, which forced many businesses to close and many workers to lose their jobs as part of statewide "stay-at-home" orders.
Total nonfarm employment has sunk back to 131 million, where it was in early 2000. All the job gains of the past decade have been lost, and for all intents and purposes, the job gains of the post–dot-com bust were lost as well.
The year-over-year change in nonfarm employment cratered at negative 12.8 percent, falling well below the YOY job losses experienced during the trough of the Great Recession.
Meanwhile, the number of Americans who prefer to work full time but can only find part-time work surged to levels above those of the 2009 recession.
The employment to population ratio collapsed to multi-decade lows, falling to 51.3 percent and below the rates seen during the early 1960s, when single-earner households were far more common.
Needless to say, it doesn't require a lot of slicing and dicing of the data to see that this report shows enormous job losses and suggests similarly large losses in total output, income, and demand. We have yet to see the trends that come next: missed rent payments, foreclosures, and auto repossessions. It is possible that some job gains will ensue once fears over COVID-19 somewhat subside and businesses are allowed to open. But we do not yet even know the full extent of the job losses, as they will continue through May, at least.
In the bigger picture, it remains very difficult to guess how much of the collapse in employment is due to government-forced shutdowns and how much is due to consumers abandoning businesses over fears of the COVID-19 disease. We know that the job losses are not 100-percent due to the shutdowns, but we know that the forced shutdowns certainly played a role. After all, we know of many cases where businesses with customers have been forced to shut down, or in which "nonessential" independent contractors were arrested or forced out of business for serving customers.
The relative effects of these two factors will likely never be known, but we do know that the fallout of both has not yet been measured. May's employment report will show sizable job losses as well, and the promised "v-shaped recovery" is by no means a given. Many economists predicted something similar in the wake of the the 2009 job losses and financial crises. That never happened, and following the last recession, the previous peak in employment was not reached again for over six years:
The idea of the V-shaped, fast recovery rally has no precedent in recent decades. Indeed, the time needed to recover lost jobs has gotten longer, not shorter. So, it doesn't take especially revolutionary insight to say what JP Morgan's Bob Michele said the other day, as reported at Mediaite:
J.P. Morgan Chief Investment Officer Bob Michele predicted it will take 10-12 years after the pandemic for U.S. employment to get back to its pre-coronavirus level, insisting it won’t be as simple as turning the economy back on.
“No, it’s not that simple … it’s going to take years, or longer to get back to where we are, or where we were,” Michele said on Bloomberg when asked if reopening would be as simple as “turning on the lights.”
Michele noted that there was a huge error when predicting unemployment numbers, as millions of Americans are losing their jobs amid the pandemic. He then compared unemployment rates during the coronavirus outbreak to the 2008 financial crisis.
“When you look at the congressional budget office forecast for the end of 2021, they have unemployment at 9 percent, so sure, materially better than where we’re going to peak in the high teens, but during the peak of the financial crisis, unemployment hit 10 percent,” he said. “So even looking out a year and a half from now, we’re still going to be roughly where we were at the peak of the financial crisis.”
Is the BLS Underestimating Unemployment? Two Fed Economists Say Yes
In a report for the Chicago Fed released Tuesday, Jason Faberman and Aastha Rajan suggest that the current realities of "unpaid leave" and other categories don't quite fit into the standard BLS measures. They suggest the unemployment rate really could be as high as 34 percent,
In summary, more than 26 million new unemployment claims are already reported between mid-March and mid-April, and job losses could exceed 20 million through April. The official unemployment rate may only capture a fraction of these losses. This is because the unique nature of the Covid-19 crisis has led to the furlough of many workers and has also made it difficult for people to look for new work, even if jobs are available. In this blog, we have proposed an alternative measure of underutilization, the U-Cov rate, which captures a broad range of workers affected by the crisis. This rate reached 12.9% in March, up 2.5 percentage points from its February level. We predict that it could reach between 25.1% and 34.6% in April, an increase of 16 to 21 percentage points, reflecting the breadth of the sharp contraction currently affecting the labor market.