Breaking All Kinds of Bad Records: The April Jobs Report

The Bureau of Labor Statistics (BLS) released the April jobs report this morning, and boy was it ugly. The newspaper headline version was that the U.S. unemployment rate shot up to 14.7%, the highest rate since the Great Depression (June 1940, to be precise), and that payroll employment fell by 20.5 million jobs:

But we knew the headline unemployment rate would understate the economic fallout of the coronavirus, as I explained in yesterday’s post on initial unemployment insurance (UI) claims. As economist Heidi Shierholz of the Economic Policy Institute points out, about one-third of coronavirus job losses are showing up as workers leaving the labor force, as opposed to activity searching for work and thus being classified as unemployed. And many affected workers appear to be misclassified as “employed, not at work” instead of “temporarily unemployed.” With these adjustments, the U.S. unemployment rate would register either 19% or 23.6% for April:

Looking at relative changes in employment circumvents the measurement issue of workers being treated as leaving the labor force (though misclassification of workers as “employed, not at work” instead of “temporarily unemployed” remains an issue, again understating the severity of the labor market’s abrupt collapse).

U.S. employment has fallen by 14% between February and April. For a sense of scale, the cumulative decline in U.S. employment during the Great Recession was “only” 6.3%, and that was far and away the worst on record since WWII. Employment has fallen off a cliff at an unprecedented rate, as nicely depicted by economist Bill McBride:

Relatedly, the employment-to-population (EPOP) ratio, which measures the share of the adult population that is employed, fell to 51.3%, a record-low since the start of the data series in 1948. The EPOP ratio has plunged 10 percentage points in the past two months:

Longer-run comparisons of employment shares are somewhat muddied by changing demographic trends, such as the baby boomers retiring: A higher share of the adult population would be expected to be out of the labor force today than a decade ago, right before the first baby boomers began retiring in 2011. Stripping out such demographic factors by honing in on the employment-to-population ratio for “prime age” (25-54 year old) workers, we again see employment plunging, albeit to the lowest share since 1975:

Any way you measure it, the relative drop in employment over the past two months is twice the cumulative loss in employment throughout the Great Recession, in a fraction of the amount of time.

Moreover, the 6.3 million initial UI claims filed in the past two weeks—data collected after the survey period for the April jobs report—guarantee that the May jobs report will show an even worse drop in employment and employment shares. Bad news all around.

I can’t see the “recovery” phase looking like a “V” in the labor market. There’s no way the share of employed adults rebounds by 10 percentage points in a comparable two-month window. It’s likely going to be a long slog back for much of the labor market, just as it was following the Great Recession.

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