As it always does at the first of each month, come Friday the Bureau of Labor Statistics will release the latest numbers on the employment situation. With the nation gripped by the coronavirus pandemic, count on these to look far different from what millions of laid-off Americans know to be reality.
Wall Street Journal economists are predicting the report will show a net loss of just 56,000 jobs and a modest rise in the official unemployment rate from 3.5% to 3.7%. It’s all about timing. While the worst impact from the economic shutdown happened in the past three weeks, the report will only assess the first few days of that period.
Said Joseph Brusuelas, chief economist at RSM US LLP, the report is “not going to really capture the significant damage out there that occurred. Investors and policy makers should just throw it out. It’s just a remembrance of things past.”
The gap between what the report will show and what’s actually happening is a product of the timing of the two monthly surveys the BLS uses to assess employment, one of businesses and one of households. These are completed around the 12th of each month. The report released at the end of this week will thus cover the last half of February and first half of March.
In other words, the government’s job data released Friday will be three weeks old and capture just a sliver of the 3.3 million workers we already know have lost their jobs since that many filed new unemployment insurance claims between March 8 and March 21. If the numbers in other states for the week ending March 28 turn out to be similar to what they were in Pennsylvania, expect to see 2-3 million additional layoffs reflected in the nationwide new claims statistics that will be released Thursday.
Since many U.S. workers are not eligible to even make claims (or think they aren’t), even more millions have also lost their jobs but are not yet visible in the statistics. Again, because of the survey timing—and the fact that California didn’t become the first state to impose a stay-at-home regime until March 19—almost none of these job losses will show up until the April jobs report is released May 8.
Some analysts believe the March report will be a lot worse than the Journal’s economics forecasters think it will be. Joel Naroff, chief economist at Naroff Economic Advisors, predicts the BLS will show 1.25 million jobs were lost and the unemployment rate jumped to 5.2%. He thinks that rate could eventually hit 14%:
“I know I’m on the high side,” he said. “But the jobless-claims data tell me a lot more workers got laid off early in the month than people realized.” Mr. Naroff said business closures and layoffs in hard-hit areas such as New York City occurred early enough to get counted in this report.
Anyone who has paid attention to the predictions of what the monthly jobs report will show knows how even the smartest analysts often get it wrong. And that’s when the economy isn’t undergoing an unprecedented, highly fluid circumstance as it is now. Predictions are nonetheless still being offered. No surprise that optimists are in short supply.
If each 1.5 million in initial unemployment claims works out to a 1% increase in the unemployment rate as Brusuelas asserts, the job claims we already know about suggest at least a 6% jobless rate for April and likely more than 10% by July. At its worst, the Great Recession hit 10% unemployment in 2009. “There is the chance we could see depression-like unemployment numbers by the time we’re through,” Brusuelas said. The Great Depression hit unemployment of 25% in 1933.
He’s hardly the only analyst to make such a grim assessment. James Bullard, president and CEO of the Federal Reserve Bank of St. Louis, said last week that 30% unemployment in the second quarter isn’t out of the question.
Those are scary numbers. Worse, they’re based on a formula that undercounts the unemployed. A different BLS tally—which counts discouraged workers as well as the underemployed—is currently running double the official 3.5% jobless rate.
Analysts at the Berenberg investment bank stated in a research note published Sunday that the coronavirus-spurred economic shutdown means probably every advanced economy will suffer a recession this year, with significant contractions in gross domestic product “ranging from 3% in the U.S. to circa 7.5% in Italy.”
To repeat, given our unique circumstances and limited data, predictions about the economy overall and about the job market in particular remain highly speculative, just a hair above guesswork. We don’t know what the impacts of the $2 trillion survival legislation will be or what other factors may come into play as the economic shutdown of large swaths of the global economy continues with no certain end in sight.
