NOTE: Before reading further, it’s important to keep in mind that while today’s jobs report from the Bureau of Labor Statistics is sobering, the data in it are three weeks out of date. That’s because the bureau uses the Current Employment Survey of 142,000 business establishments at 689,000 individual worksites to tally how many jobs are created or lost each month and derives the unemployment rate from the Current Population Survey of 60,000 households. Since the final day of both surveys falls on or around the 12th of each month, this report actually measures jobs gained in the first part of May and the last part of April.
With that caveat in mind, in a surprising report today, the BLS stated that in May a seasonally adjusted 2.5 million jobs were added to the economy, a clear indication that more people have returned to work than just about anybody expected. The median forecast of analysts surveyed by Bloomberg ahead of the report was a loss of another 7.25 million jobs, amazingly off the mark. As always, the bureau revised its figures for the past two months, boosting April’s job losses from the previous count of 20.5 million to 20.7 million and March’s loss of 881,000 jobs to a loss of 1.4 million.
Naturally, there was trumpeting from the White House.
“It seems the damage to the nationwide lockdown was not as severe or as lasting as we feared a month ago,” Scott Clemons, chief investment strategist at Brown Brothers Harriman, to CNBC.
The Labor Department noted: “If the workers who were recorded as employed but absent from work due to "other reasons" (over and above the number absent for other reasons in a typical May) have been classified as unemployed on temporary layoff, the overall unemployment rate would have been about 3 percentage points higher than reported (on a not seasonally adjusted basis). However, according to usual practice, the data from the household survey are accepted as recorded. To maintain data integrity, no ad hoc actions are taken to reclassify survey responses.”
This total seasonally adjusted loss of 19.6 million jobs over the past three months contrasts with the 37 million who, as of May 30, had filed for and were receiving or waiting to receive state or federal unemployment benefits. The bureau reported that U3—the official unemployment rate that counts the total number of people out of work as a percentage of the civilian labor force—fell from a seasonally adjusted 14.7% in April to 13.3% in May. Experts were expecting a rate of 19%. Three months ago, the U3 rate was 3.5%. Another rate—U6, which covers not just unemployed workers, but the underemployed and also some discouraged workers—fell from 22.8% to 21.2% after having been 7.0% in February. Many economists view U6 as a better gauge than U3 of labor’s well-being.
The household survey showed a seasonally adjusted rise for all employed workers from 133.4 million in April to 137.2 million in May. In March, that count was 155.7 million. The household survey includes agricultural workers, the self-employed, unpaid family workers, and private household workers among the employed, categories that are not covered by the establishment survey.
Although no analyst predicted anything like today’s gains, the pain nevertheless extends far and wide. Absent aggressive action from Congress, this will obviously increase, with the likelihood of a deluge of evictions and defaults on the horizon. People are skipping payments on credit cards, auto loans, and mortgages. At the moment, many of them are getting help from some creditors and landlords who are allowing for partial or delayed payments. For instance, the analytics company Black Knight reports that 4.75 million homeowners—or 9% of all mortgages—have obtained forbearance arrangements with their lenders. Such relaxation of payment timing cannot last long.
Some highlights:
Manufacturing gained 225,000 jobs in May after a loss of 1.32 million in April. Manufacturing had already been having hard times since the middle of 2019.
Construction gained 464,000 jobs in May, having lost 995,000 in April.
Leisure & Hospitality gained 1.24 million jobs in May after losing 7.54 million in April.
Teachers and other educators lost another 309,000 jobs in May after losing 449,000 in April. States and local governments are have an especially bad time because revenues are taking huge hits with so many out of work and not paying as much in sales taxes nor gasoline and other excise taxes. On average, these make up about 35% of state revenues. Forty-three states also depend on income taxes for some of their revenue, with biggest impacts in California, New York, Illinois, New Jersey, and Massachusetts.
May job gains and losses for selected categories: Table B.1 provides more granular details of each of these.
- Education and health services: +424,000
° Health care & social assistance: +390,700
- Professional and business services: +127,000
- Temporary help services: 39,100
- Transportation & warehousing: -19,000
- Financial activities: +33,000
- Information: -38,000
- Retail trade: +367,800
- Mining and Logging: -20,000
- Government at all levels: -585,000
As Americans begin the slow return to those jobs that still exist, exactly how all this will play out is still highly speculative. As Mark Vitner, senior economist at Wells Fargo & Co., said last month: “In the Great Depression, the vast majority of job losses were permanent. Today the vast majority of job losses are temporary.” Nonetheless, he added, “I don’t think we get back to 100% for at least a year, 18 months, and we’re not going to need as many workers if we’re not back at 100%.” Other sources have gone so far as to say 42% of jobs may be permanently lost.
More data from the May jobs report:
1.75 million rejoined the workforce in May after 6.4 million left it in April.
The labor force participation rate rose from 60.2% to 60.8%. The employment-population ratio rose from 51.3% to 52.8%
Unemployment rates differ by race and sex: (May percentages in bold; April percentages in [brackets and italics].)
Adult men: 11.6% [13%]
Adult women: 13.9% [15.5%]
Whites: 12.4% [14.2%]
Blacks: 16.8% [16.7%]
Asians: 15% [14.5%]
Hispanics: 17.6% [18.9%]
American Indians: Not counted monthly.
• Average hourly earnings of private-sector production and nonsupervisory employees in May fell 14 cents to $25.00 after having risen $1.04 an hour in April.
• Average hourly earnings for all employees on private nonfarm payrolls in May fell 29 cents to $29.75 after having risen $1.35 an hour in April.
• Average work week for all employees on nonfarm payrolls increased by 0.5 hours to 34.7 hours in May.
• The manufacturing work week in May rose by 0.8 hours to 38.9 hours.
