I am a bit taken aback at how shocked so many are about the new jobs report showing that net hiring in May was positive. For regular readers here I have made several posts here noting that the US economy was almost certainly growing, probably for at least a month. The most recent was my one a few days ago on Rising Oil Demand, and an earlier one, where I was vaguer about the US economy, was the one on Rising Carbon Emissions. It has been clear to me that the US economy hit bottom in terms of output about a month ago, which put it about a month behind the world economy as a whole and two months behind China. All of this correlates with how the relative patterns of the pandemic have gone, with China a month ahead of most of the world and about two months ahead of the US. I think it has been pretty clear that US GDP has been growing, so nobody should be all that surprised that the labor market has turned around and net hiring is now positive.
How did all this confusion come about? I think the issue is that we get weekly reports on fresh layoffs as measured by new applications for unemployment insurance while we only get monthly reports on net hiring, with our monthly BLS reports such as the one that came out today and surprised the heck out of so many observers who should have known better. I note that I did not forecast an increase in net hiring, but I had avoided making any forecasts on employment beyond the comment that it is a lagging indicator behind output, which would allow for net hiring to have still been negative. But I was somewhat mystified by what seemed to be such an disjuncture, clear evidence GDP was rising while there were these ongoing weekly reports of many more getting laid off.
The answer is now fairly clear. Indeed lots of layoffs are happening and probably will for some time to come. But, not only have those numbers been falling, but the ongoing layoffs are increasingly concentrated in certain sectors, such as education where net hiring was negative in May. Indeed, we are likely to see a surge of layoffs in the local and state government sectors as those have not seen revenues rise and are not getting federal aid and also face balanced budget constraints.
However, hiring has been going on in other sectors, not publicly reported until today. Among those are hospitality and tourism, construction, and manufacturing (hence rising oil demand and carbon emissions). Some numbers I have seen on some blogs, so not sure they are accurate, include a claim that a full 54% of the hiring occurred in the restaurant sector. Yes, there have been a lot of reopenings there, if still somewhat limited. Another odd figure Tyler Cowen reports on MR is that supposedly 10% of the new jobs are in the dentistry sector. Really? Who am I to say.
I do note that by some alternative procedures than reported, the unemployment rate should be 3% higher than reported, and thus would have increased. Nevertheless, it does seem that there was a net increase in jobs during May.
What does this portend for the future? I remain doubtful of a “V” shaped recovery, despite a lot of crowing about such today. This growth is so far fairly slow, and the decline in the unemployment rate not all that dramatic. The pandemic is still expanding in some states, with Florida hitting a new daily high for new cases on Wednesday, even if new cases are gradually declining nationally. Even if there is no second wave, fear of such and the continuing presence of the virus will hinder rapid growth for some time, probably at least through most of the third quarter. But I would say that the probability of a “U” shaped recovery has probably risen, with a possibly much more rapid growth rate in the crucial fourth quarter if indeed the virus continues not only to decline but to really stay down, thus reducing peoples’ fears and allowing them to really get out there and spend and “go back to (almost) normal.”
Barkley Rosser
June 5, 2020
Employment Jumps 2.5 Million in May, as Unemployment Falls to 13.3 Percent
By DEAN BAKER
Seventy-three percent of the unemployed report being on temporary layoffs.
The May jobs numbers were considerably better than most analysts had expected with the economy reportedly adding 2,509,000 jobs, while the unemployment rate fell by 1.4 percentage points to 13.3 percent. This improved labor market picture should not have been surprising since many businesses across the country had reopened by the survey week in mid-April. The high number of unemployment insurance claims, continuing through May, likely gave a wrong picture, as delays in processing caused claims to appear much later than they had been filed.
The job growth was widespread across sectors but was nowhere close to being proportionate to earlier losses. Restaurants accounted for more than half of the job growth, adding 1,370,600 jobs, but employment in the sector is still down by 36.6 percent from year-ago levels. Health care added 312,400 jobs in May, but employment is still down by 6.0 percent from year-ago levels. This is the result of people deferring nonessential procedures. Employment in dentists’ offices is down by 29.8 percent from year-ago levels.
Both construction and manufacturing showed huge job growth in May, adding 464,000 and 225,000 jobs, respectively. Employment in these sectors is down 5.8 percent and 8.7 percent, respectively over the last year. The relatively strong construction employment data is consistent with data on April construction levels, which showed a limited falloff in most categories of construction. An encouraging note on manufacturing is the one-month diffusion index, which shows the percentage of industries planning to increase employment, was 70.4 in May. (It was 60.4 for the overall economy.)
Retail added 367,800 jobs in May, but employment was still 12.5 percent below year-ago levels. Department stores have been especially hard hit with employment down by 21.2 percent over the last year. By contrast, employment at online retailers is down by just 6.9 percent since May 2019.
Some industries continued to be big job losers. Airlines laid off 50,300 workers in May, employment is now 23.4 percent below year-ago levels. The motion picture industry shed another 10,700 jobs, leaving employment 51.1 percent lower than May 2019. Hotels lost 148,200 jobs, with employment down 50.4 percent from last May. City transit employment rose by 10,100 but is still 34.1 percent below year-ago levels.
State and local government employment fell by another 571,000. It is now 1,571,000 below February levels. With these governments facing massive budget shortfalls due to the shutdowns, another large round of layoffs is a virtual certainty if Congress does not appropriate a large rescue package. This will be a huge drag on the recovery, especially since these governments will need to be hiring large numbers of testers and trackers if businesses are to be able to operate safely.
One encouraging sign was a drop in average weekly hours in manufacturing of 4.2 percent from year-ago levels. This indicates employers are cutting hours rather than laying off workers. This drop translates into hundreds of thousands of additional jobs in the sector.
The wage data show a sharp year-over-year rise, but this is due to composition effects (lower-paid workers have lost their jobs), so it is best ignored.
As noted, the data in the household survey was somewhat better than had generally been expected. It is important to note that the Bureau of Labor Statistics warns that many people who were laid off without pay were wrongly counted as employed. If these people had been counted correctly, the unemployment rate would have been roughly 16.3 percent. In April, this error had lowered the reported unemployment rate by roughly 5.0 percentage points.
The rise in unemployment has differed sharply among demographic groups. The unemployment rate for women over 20 is up by 10.8 percentage points from February, compared to an increase of 8.3 percentage points among men. This reflects the large contraction in employment in sectors that disproportionately employ women, such as restaurants and hotels. The unemployment rate for Blacks and Hispanics of all ages rose by 11.0 and 13.2 percentage points, respectively. This compares to an increase of 9.3 percentage points in the unemployment rate for Whites. The gaps almost certainly would have been larger if so many Black and Hispanic workers had not been classified as essential. While the 12.4 percent May unemployment rate for Whites is far above any prior peak (except April), the 16.8 percent rate for Blacks is far below the peak of 21.2 percent hit in January of 1983.
One very positive sign is that the vast majority of unemployed workers, 73.0 percent, report being on temporary layoffs. This group typically accounts for around 10.0-14.0 percent of the unemployed. Obviously, many of these layoffs will turn out to be permanent, but it seems likely that a large share of the unemployed will be able to go back to their jobs.
[Graph]
It is hard to see a 13.3 percent unemployment rate as positive, but it does support the view of the economy facing a severe recession, as opposed to a complete collapse. This is consistent with data showing that construction and home buying remain healthy and new orders for capital equipment have not fallen through the floor.
The improvement from April really should not have been surprising, since we should have expected more people to be working when it was legal to work than when it was not, due to the shutdown. However, we are still looking at unemployment that is far worse than the Great Recession and the recovery will be seriously impaired by more layoffs in the state and local government sectors unless there is a large rescue package.
Anne:
It is a hot selling market for homes and the prices are pretty solid. We will probably sell now rather than wair for the Repubs and Trump to blow everything up come November. It is the first time our timing may be correct. I am going on two months shy of a haircut. When I was young and my hair was black, it would look good. The air is still on my head and silver. I hate long hair.
I believe we have a long time to go before the economy comes back to where it was even though the stock market is recouping. There will be many people hurting in the short term.
The PPP effect. It will hurt this summer though. Looks weak.
Agree with all of that. Just do not see hospitality and travel recovering this year and figure the GOP dominated Senate will prevent state and local governments from picking up the slack. IF…..IF. They get a real handle on the virus whether through a vaccine or testing, contact tracing and mask wearing I figure they can get unemployment down to 8% by a year from now but even that will come with some deflation. Not sure the economy can be salvaged without getting the virus under control especially if GOP controls the Senate.
“… I am going on two months shy of a haircut… still on my head and silver. I hate long hair.”
[My last was early March and I have no plans yet for the next. Mine is a lot thinner than fifty years ago when I always wore it long, but mostly darker now rather than grey. I have never used hair coloring. My guess is that I have inherited just enough Cherokee for a hybrid vigor effect on my hair. My dad had black hair for as long as he had any hair at all on his head, with just a few streaks of grey. I have a few grey strays, but they hardly show at all.
I originally grew my hair out long as a social statement in the 60’s, but by the 70’s it was in danger of being seen as a fashion statement rather than a social statement, so I began dressing down, seriously grungy, to balance out to get the desired effect. In those times long hair was a much better social marker for meeting pot and acid dealers than it was chicks, but the few chicks that did come my way were a whole lot fun. Other social activists had become as scarce as hen’s teeth. Disco faded slightly to make room for punk rock, but the true movement side of punk was in the UK and not the US.
In 1990 I bought a 21 foot fishing boat and powered it with a 150 HP Evinrude. There were way too many tangles in my ponytail after that to keep it long. Besides, by then the social statement had become entirely meaningless regardless of how I dressed. When I scored it was with people that I had already known for over ten years.]
it was not until early in this century that I finally became a responsible adult, a married homeowner, socially isolated, and a straight arrow battered by outsourcing at work for both my wife and myself along with a succession of mergers at my wife’s work. Normalcy is highly overrated.
on the cause of the jobs surge, i’ll agree with Bert this time…here’s what i wrote:
Before this report was released, the consensus estimate was that we’d see an additional loss of 8,250,000 jobs in May, so this report left many prognosticators with egg on their faces…some have speculated that the removal of the coronavirus restrictions may have accounted for the surprise employment increase, but this survey was conducted between May 10th and May 16th, when most states were still enforcing widespread lockdowns…more likely is that many companies brought employees back on their payrolls to qualify for loan forgiveness under the Payroll Protection Plan passed earlier by congress, which had the banks dole out thousands of govt guaranteed loans to companies to tide them over through the coronavirus lockdown, with the provision that the loans would be forgiven if their employees were kept on the payroll…the establishment survey counts workers who are paid by their employer for all or any part of the pay period including the 12th of the month as employed, even if they were not actually at their jobs….hence, this reported increase in payroll jobs does not necesssarily mean that more of us were working…whatever the case, weekly unemployment claims and other reports suggested further job losses in May consistent with the estimates, so we’ll probably see quite a bit of Monday morning quarterbacking next week as the analysts try to sort it all out…
and to confirm figures sited by Barkley above: with a net increase of 1,239,000 jobs, the leisure and hospitality sector accounted for more than half of the May job gain, with an increase of 1,370,600 employees working in bars and restaurants partly offset by a loss of 148,000 jobs in accommodation….employment in health care and social assistance rose by 390,700, with the return of 244,800 jobs in dentist’s offices, and 71,200 jobs in offices of health practitioners other than dentists or doctors…
https://fred.stlouisfed.org/graph/?g=qVRC
January 15, 2018
Thirty- and Fifteen-Year Fixed Rate Mortgage Average, 2017-2018
https://fred.stlouisfed.org/graph/?g=lJRO
January 15, 2018
Thirty- and Fifteen-Year Fixed Rate Mortgage Average, 2007-2018
Run75441
June 7, 2020
It is a hot selling market for homes and the prices are pretty solid.
[ Federal Reserve policy has protected the stock, bond and home markets, so that householders with savings and assets are about where they were in January or even a little ahead in terms of portfolio. This protection was necessary, especially for older householders. ]
Thank you Anne.
https://fred.stlouisfed.org/graph/?g=nAlz
January 15, 2020
Owners’ equivalent rent of residences, 1992-2020
(Percent change)
anne,
Thanks for finding Dean Baker. I have kept going to Beat the Press, but I guess he has shut that blog down for good. Glad he is still posting. Was worried that he was just completely shut down like some others.
As it is, I agree with his post, with mine not as lengthy or detailed, except that I added that I had been calling the turnaround in US GDP growth for some time, which I do not know if he did or not ahead of this report.
here’s a riddle for you all to work on; this May report revised the payroll jobs decrease for April from a loss of 20,500,000 jobs to a loss of 20,687,000 jobs…today’s JOLTS report reported total hires of 3,524,000 and total separations of 9,888,000 in April, which would imply an decrease of just 6,364,000 jobs…the difference between the job loss figures from those two reports usually falls within the expected +/-115,000 margin of error for those reports; why the difference now and which report is most wrong?
i understand a small part of the difference is likely due to the difference in the date of the surveys, which is at month end for JOLTS but during the week of the 12th for the employment situation….but that couldn’t have caused a difference of that magnitude…