The Week in Review: May 11, 2020
The Gut-Wrenching Employment Report
We knew the labor report for April would take our breath away. Yet, while expected, the staggering number of job losses is something that would have been inconceivable a few short months ago.
In April, nonfarm payrolls fell a record 20.5 million, and the unemployment rate rose to 14.7% from 4.4% the prior month (U.S. Bureau of Labor Statistics data). In February, the jobless rate was 3.5%.
April’s decline in payrolls exceeded the prior record set in September 1945, when the end of WWII temporarily erased 2 million jobs.
Here is another take: Last month’s loss of 20.5 million jobs equated to a monthly decline of 13.5%.
The private sector lost 19.5 million jobs, including 7.7 million in leisure and hospitality. The service sector lost 17.2 million jobs, and manufacturing shed 1.3 million.
Almost two-thirds of the 1 million government jobs came in education, with the remainder in local government positions. Federal and non-state education were nearly untouched. That could change at the state level without federal aid.
Notably, the level of education played a big role in April’s jobless numbers. Those without a college degree were hit particularly hard amid layoffs in service-related industries. Jobs that require a college degree weren’t immune, but for now, many who remain on the payroll have been able to work at home and weren’t affected by mandatory business closures.
If there is a silver lining, the number of unemployed persons who said their layoff is temporary was 18 million, per U.S. BLS data. Let’s hope so. But much will depend on the trajectory of the virus and confidence that public settings are safe.
Green shoots
Jobless claims remain at historically high levels, suggesting we’ll see another unsettling report in May. But the number filing for unemployment insurance has been declining.
Meanwhile, Bloomberg News reported on May 5 that 21 states were slowly reopening their economies, and lockdowns were winding down in four others.
As states reopen, some workers will be recalled, easing the catastrophic impact of COVID-19 on the labor market.
Still, we’re not completely out of the woods since the first round of layoffs (mostly lockdowns) could be followed by a second round of layoffs (falling demand for goods and services).
Here is another positive: While travel is down sharply from a year ago, when 2 million to 2.5 million daily passengers were passing through TSA checkpoints, air travel is starting to tick higher.
The hotel industry is another sector that has been hard hit by lockdowns and reduced air travel. Occupancy rates are down sharply but are beginning to inch higher.
Finally, gasoline usage is down over 30% from a year ago but is up 31% in the last three weeks (Energy Information Administration as of 5/1/2020).
Back-of-the-envelope analysis: People are slowly venturing outside.
These are unconventional metrics, but they are flashing cautiously positive signs. How economic activity unfolds during the summer months will probably be determined by the success that states have in reopening their economies and whether we see a big flare-up in COVID-19 cases.
The confidence level of going back in public will also play a significant role, even as social distancing requirements will likely be the norm. A greater understanding in effective treatment and a vaccine would provide a much greater degree of comfort.
If you have any questions or concerns, feel free to reach out to me, Will, or Tyler.
Two for the Road
Between 1987 and 1994, the U.S. Postal Service purchased 141,000 boxy Grumman mail trucks with an intended lifespan of 24 years—today the average age is 28, costing the USPS about $2 billion annually to maintain them. —Vox, April 22, 2020
“The gross national product does not allow for the health of our children, the quality of their education, or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages; the intelligence of our public debate or the integrity of our public officials. It measures neither our wit nor our courage; neither our wisdom nor our learning; neither our compassion nor our devotion to our country; it measures everything, in short, except that which makes life worthwhile.” —Robert Kennedy
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