Crater: Unemployment rate 14.7%, 20.5 million jobs vaporized in April

The ADP employment projection of 20.2 million jobs lost turned out to be a near-bullseye, under the circumstances. The Bureau of Labor Statistics gave the worst jobs report in its history, tallying up the COVID-19 pandemic toll on the labor market at 20.5 million jobs in April. The unemployment rate jumped more than ten full points to hit 14.7%, both new records in the 72-year series:

Total nonfarm payroll employment fell by 20.5 million in April, and the unemployment rate rose to 14.7 percent, the U.S. Bureau of Labor Statistics reported today. The changes in these measures reflect the effects of the coronavirus (COVID-19) pandemic and efforts to contain it. Employment fell sharply in all major industry sectors, with particularly heavy job losses in leisure and hospitality. …

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. (See table A-1. For more information about how the household survey and its measures were affected by the coronavirus pandemic, see the box note on page 5.)

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. (See tables A-1, A-2, and A-3.)

This might not be quite as bad as expected. Over 33 million jobless claims got filed in March and April, so this represents slightly under two-thirds that number. Some of those filers might have either found another job or got recalled to their previous employers, but clearly not most of them — and the jobless number might still be underestimated by this report.

That’s because this data comes with a big caveat. For those who do not already know this, BLS compiles this data through two surveys, both essentially polls, although with very large sample sizes. Thanks to the pandemic, the data collection for April was significantly impacted, with the BLS estimating a shrinkage of 13% in the Household Survey sample. For the Establishment survey, the challenge came in attempting to discover whether businesses were still alive:

There was a change to the estimation method used in the establishment survey for April. Business births and deaths cannot be adequately captured by the establishment survey as they occur. Therefore, the establishment survey estimates use a model to account for the relatively stable net employment change generated by business births and deaths. Due to the impact of the COVID-19 pandemic, the relationship between the two was no longer stable in April. Therefore, the establishment survey made modifications to the birth-death model.

Even in the Household model, where the calculations are simpler, the issue of determining “employed” status gets complicated in a shutdown. BLS settled on a definition of having been paid on or before April 12, the usual marker for Household surveys, but that’s going to be a problem in this report. Much of the meltdown had already taken place by that point, but several million more jobless claims flowed in the weeks after that too. This might only represent about two-thirds of the meltdown, in other words, and the hangover might last into the May jobs report even if we see a rebound later this months … say, after the 12th or so.

In a disastrous downturn of this scope, the component data is much less meaningful. However, there are a few points to note in the BLS breakdown. First off, the combined number of unemployed (15.9 million) and those leaving the workforce (6.6 million) outstrip the job losses. There might be some overlap between the two, but it’s more likely that recent re-entrants have become discouraged and have re-exited the workforce. The Household numbers of employed dropped 22.4 million, not 20.5 million, which means people are more likely to report their jobs as destroyed than their employers are.

In the establishment survey, every single industry gets hammered, even those one might suppose would benefit. Health care and social assistance dropped over two million jobs, likely from the bar on non-essential services and surgeries. The least impacted industry turned out to be utilities, which only lost 3300 jobs in April, but is clearly one of the most essential of all industry classifications.

This is such a black-swan event that it defies easy political application. We knew that the need to shut down economic activity would take a heavy toll; this is just the bill coming due, and likely not the last one we’ll see, either. Donald Trump emphasized that point when asked about the jobs report this morning, and argued that he won’t be judged on the losses but on how he responds to them. That’s almost certainly true, and one reason among many why Trump has been pushing the need to reopen the economy.