- Thoughts on GME and This Week in the Stock Market
- Record Home Price Levels Point to Strength in Post-Pandemic Economy
- The Stock Market Looks Overvalued, but It's Probably Not
- China GDP Growth Surpasses Expectations
- President-elect Joe Biden Introduces His "American Rescue Plan"
- Political Polarization Intensifies with Another Impeachment Along Party Lines
- Metal Demand Has a Bright Future in 2021 and Beyond
- What Happened to That US-China Trade Dispute?
- Civil Unrest, A Rising Threat to the 2021 Economy
- What's in the $900 Billion Relief Plan?
- Long Term Employment Shifts Caused by the Pandemic
- Earnings Provide Positive Surprise Despite Pandemic
- Renewable Energy Under Fire in Texas
- Yellen Aims for Full Employment
- Minimum Wage Research in the Spotlight as a Hike Looks Inevitable
- Non-Residential Construction Soft in the Pandemic Economy
- Views on Interest Rates and the Move in Treasury Yields
- Inflation Indicators Healthy but Still on the Rise
- Risky Assets Sell-off Despite Optimistic Economic Outlook
- The Latest on Vaccinations and What it Means for Growth
- Highlights of the Fed's "Economic Well-Being of U.S. Households in 2020" Report
- Relative Factors and Forward Change in Federal Funds Rate
- Can Wage Growth Keep Up With Inflation?
- With That, We Carry On
- Supply Pressures Looking to Peak
- Cars are Still Expensive, Workers are Still Needed
- Recovery Continues, but Delta Looms
- Fed Eyes Tapering While China Sees a Setback
- Review the Fed Previews
- No Tapering Yet
- Labor Day on Labor Day
Stunning Jobs Report Might Not Be as Good as It Looks
June 05, 2020
A huge jobs report closed out the week with a fantastic surprise as the Bureau of Labor Statistics reported employment rising by 2.5 million jobs in May beating expectations by a lot. The improvement was a result of reopening by some states as leisure and hospitality jobs saw a sharp rise. The unemployment rate fell 13.3%, down -1.4%, in a huge reversal of sentiment. Temporary layoffs saw a huge drop of 2.7 million as people were up to work after 16.2 million workers were temporarily unemployed in April. The labor force participation rate increased 0.6% to 60.8%, another trend that was reversed. The number of people employed part-time for economic reasons was still at it elevated level from March and February, 10.6 million, suggesting there is still a lot of weakness in the labor market due to restricted cash flow. Businesses want to keep people employed, but utilization is not high enough to support a lot of full-time workers.
Taken as it is, the job report is an extremely optimistic economic data point, and the markets showed that as stocks shot up on Friday. However, the complications of the COVID-19 outbreak and uniqueness of the crisis forces us to consider some caveats:
- The BLS noted in its report that response rates during the COVID-19 pandemic have been noticeably lower than average. Specifically, the household survey, which is used to calculate the overall unemployment rate, saw a 67% response, 15% lower than months prior to the pandemic. There's no exact reason why a third of respondents were unresponsive, but it could lead to more sampling error.
- With the uniqueness of this situation, the definition of being "employed" has had to shift to accommodate social distancing guidelines. The BLS's definition, " workers who are paid by their employer for all or any part of the pay period including the 12th of the month are counted as employed, even if they were not actually at their jobs," restricts employment to whether or not someone is earning a paycheck. That may include people who are still with their employer for the time being but fails to capture the reduction in productivity and fragility of the job. These "jobs" which lead to no output but cost firms cash flow will be the most in danger of a prolonged crisis where revenues don't recover and businesses go bankrupt.
- The final concern is hidden deep inside the May jobs report's FAQ. The BLS reports that there was likely some misclassification of workers caused by some confusion in the survey. In particular, individuals "who were themselves ill, under quarantine, or self-isolating due to health concerns, people who did not work during the survey reference week (May 10–16) due to efforts to contain the spread of the coronavirus" might have been counted as "employed but not at work" when they should have received the "unemployed on temporary layoff" designation. This reason for this ties into the second concern above where the measure of employment relies on wages being paid. The BLS estimates that if these misclassified individuals, about 4.9 million of them, were marked as unemployed, the actual unemployment rate would have increased 3.1% to 16.4%.