ADP Reports 20 Million Jobs Lost: A Disaster Comparison Three Ways

Mish

ADP reports 20.236 million jobs private vanished in April.

The ADP National Employment Report provides the strongest clue yet for the pending disastrous BLS jobs report on Friday.

Private sector employment decreased by 20,236,000 jobs from March  to April according to the April ADP National Employment Report®.  The report utilizes data through the 12th of the month. The NER uses the same time period the Bureau of Labor and Statistics uses for their survey. As such, the April NER does not reflect the full impact of COVID-19 on the overall employment situation. 

Unprecedented Job Losses

Job losses of this scale are unprecedented. The total number of job losses for the month of April alone was more than double the total jobs lost during the Great Recession,” said Ahu Yildirmaz, co-head of the ADP Research Institute. “Additionally, it is important to note that the report is based on the total number of payroll records for employees who were active on a company’s payroll through the 12th of the month. This is the same time period the Bureau of Labor and Statistics uses for their survey.”

Job Losses by Company Size

Job Losses by Company Size 2020-05-05

Job Losses By Sector

Job Losses bySector 2020-05-05

Initial Unemployment Claims

Initial Unemployment Claims in 2020 - 2020-04-25

In the last 6 week there have been 30 million initial unemployment claims.

20 Years of Employment Gains Have Vanished

Employment Level 2020-05-05

Based on the 30 million claims, I commented 20 Years of Employment Gains Have Vanished.

If we assume only 20 million jobs were lost, that would roughly takes us back fo January 2000 or so.

But those are "Private Jobs". They are a subset of "All Employees Total Nonfarm" which in turn is a subset of "Employment Level".

Unemployment Rate

Yesterday, the Chicago Fed addressed the question Is the Unemployment Rate a Good Measure of People Currently Out of Work?

The Chicago Fed projected a baseline unemployment rate of 9.4% with a U-6 rate of 18.9% and a COV-Underutilization Rate of 29%. The Cov rate is essentially the U-6 rate except that it makes additions for Cov-impacted workers.

Recall that if people did not look for work, they are not unemployed. But furloughed people (temporary layoffs), don't have to look. 

Upcoming Jobs Report: What Will the Unemployment Rate Be?

On April 30, and based on the 30 million claims, I asked Upcoming Jobs Report: What Will the Unemployment Rate Be?

Here is my formula

Unemployment Rate = (New Claims + Existing Unemployed + Estimate of Claims to Come) / Labor Force

OverCounts

But I also allowed for overcounts, that is people who made an unemployment claim but will not be considered by the BLS as unemployed. Recall that if you worked as little as 1 hour, you are considered "employed". 

Furthermore, I made the assumption that there were no new claims coming, making the formula: Unemployment Rate = (New Claims + Existing Unemployed - Estimate of overcounts) / Labor Force

Assume a "Net" Overcount of 8 Million

30.303 million New Claims + 7.140 million Existing Unemployed - 8.000 million Overcounts / 162.913  Labor Force = 18.1%

Assume a "Net" Undercount of 2 Million

30.303 million + 7.140 million + 2.000 million / 162.913 = 24.2% 

To pick a specific number, I will go with 21% assuming a net overcount of 4.0 million vs the Household Survey (yielding 20.5%) + another 0.5 percentage points representing a change in the Labor Force.

Mish vs Chicago Fed vs Bloomberg

My Unemployment rate projection is 21% vs the Chicago Fed baseline of 9.4%

For comparison purposes, Bloomberg estimated 20%. 

For details and BLS caveats, please see 20 Years of Employment Gains Have Vanished.

Mish

Comments (55)
No. 1-14
MiTurn
MiTurn

Utterly amazing and difficult to get my head around. The ramifications will take months or years to play out. History being made.

tokidoki
tokidoki

Dow 400K
Nasdaq 100K

We will see companies with EPS reaching 1 million and above. "At least they have a positive earning!!!!"

Tony Bennett
Tony Bennett

What? Me Worry?

Nah.

St Louis FRB president Bullard today on cnbc:

He expects the third quarter to be a "transition quarter," he said, but that the US will return relatively quickly to growth and by the end of the year will be "finishing up this process." The unemployment rate, which is expected to jump above 10% in April, could fall back below double digits by the end of the year, Bullard said.

Sechel
Sechel

It may be unprecedented but comparisons to the great depression are not valid as the rate is expected to come down by year's end to around 10% Until then unemployment benefits and CARE payments should bridge the gap. I'm not making light of this, its serious but unless we believe things stay depressed and i mean very depressed on a multi-year basis its not the end of the world.

Many in the media are comparing these numbers to the Great Depression

Tony Bennett
Tony Bennett

So glad housing not dependent on jobs ... oh, wait ...

Yields spiking this week + from MBA on mortgages:

Total loans in forbearance grew relative to the prior week from 6.99% to 7.54%. In comparison, only 0.25% of all loans were in forbearance for the week of March 2.

...

Think you can tap home equity to get over rough patch? Think again.

MBA:

"Mortgage application volume was unchanged last week, even as the 30-year fixed rate mortgage declined to 3.40 percent - a new record in MBA's survey," said Mike Fratantoni, MBA's Senior Vice President and Chief Economist. "Despite lower rates, refinance applications dropped, as many lenders are offering higher rates for refinances than for purchase loans, and others are suspending the availability of cash-out refinance loans because of their inability to sell them to Fannie Mae and Freddie Mac."

WildBull
WildBull

Every one of the talking heads is trying to but lipstick on the pig. The St Louis FRB president of full of shit. It will be impossible to open much of the economy without increasing the infection rate. At 25000 new cases per day, that's 10,000 days to herd immunity. Triple that (and hence the death rate) and we can bring it down to 3300 days or about 11 years without a treatment or vaccine. With a vaccine we can start to normalize in Q1 orQ2 next year. What will be left of the economy by then? Unemployment is still working is way back through the supply chain. WTF (W = who) is he kidding? Sweden has it right

numike
numike

So some initial digestion of this bombshell study...
We probably now have to redo nearly all the vaccine designs and serology assays.
But it gets worse. The immune system is mostly recognizing viral proteins involved after replication meaning they won’t neutralize the virus.

Sequoia
Sequoia

This is not all bad news. I feel we could easily lose 5 to 7 million illegal immigrants. As they have lost their jobs and do not qualify for unemployment. Also the charities are losing funding and food banks will close. Look for this an the airbnb fiasco to kill housing as millions of homes sit empty.
All this will help the working poor here as they take the jobs that have been going to illegal aliens. Also the H1B Visa program needs to be shut till further notice.

To everyone who thinks this is racist it is not. My first wife is from Mexico and my second from Argentina. They are just legal highly educated women who did immigration properly. Prior to me meeting them.

thimk
thimk

I think in hindsight we will realize we "shutdown" an excessive amount of business types/sectors/occupations. Also this one size fit's all shutdown model was particularly damaging . I can't remember any instance in record able history
where a sovereign nation/ empire purposely shut down its economy for any reason .
This is truly a historic event - Yay !

Jdog1
Jdog1

The sad thing is the unemployment bonus is actually going to make unemployment worse latter in the year and next year.
People currently making more being unemployed than they made working will want to milk their windfall as long as possible. This is going to create a shortage of labor for already struggling businesses trying to re-open, that cannot compete with UI for wages. The result will be more business closings and by the time many of those on UI now return to the job market, many fewer jobs will exist for them to return to.
It will also prompt big business to make the investment to automate wherever it is economical to do so.
The worst thing you ever want to hear is the government saying they are going to help you....... You can be sure it will be a disaster.

Six000mileyear
Six000mileyear

The amazing statistic was "Large" companies with 500 to 999 employees laid off the fewest people. The follow-up question is, "How proportional were the layoffs?"

lol
lol

After a couple days (hours)BLS counts them as out of the labor force so we could see a zero unemployment "rate" or maybe even a negative unemployment...."rate"MAGA bitches lol!

Stan88
Stan88

Don't worry folks, after 6 months these 20 million people will not be considered part of the labor force anymore and the unemployment rate will drop back to 4%