Over 20 Million Jobs Lost As Unemployment Rises Most In History

Mish

The unemployment rate jump to 14.7% as nonfarm payrolls declined by 20.5 million jobs.

This was the most distorted BLS report in history.

Initial Reaction

The headline jobs number fell by 20.5 million and the unemployment rate jumped 10.3 percentage points to 14.7% according to the BLS Employment Report.

The 10.PP jump and the number of jobs lost were the most in history. The average workweek rose, at least for those still working. 

Special Instructions

The BLS had "special instruction" this month but the answers came out wrong anyway. 

As was the case in March, special instructions sent to household survey interviewers called for all employed persons absent from work due to coronavirus-related business closures to be classified as unemployed on temporary layoff. However, it is apparent that not all such workers were so classified. 

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 April) had been classified as unemployed on temporary layoff, the overall unemployment rate would have been almost 5 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. 

Add 5 percentage to the total for the real answer. The unemployment rate was almost 20%.

Seasonal Adjustments Gone Haywire

Inquiring minds may also be interested in Seasonal Adjustments and other changes the BLS made in its special report The impact of the coronavirus (COVID-19) pandemic on  The Employment Situation for April 2020.

During their review of household survey data for April, BLS staff tested for outliers to determine  whether any changes were needed to the seasonal adjustment models. BLS staff determined that the vast  majority of household survey data series had significant outliers in April and manually added outlier terms to the seasonal adjustment models. 

Seasonal adjustment factors can be either multiplicative or additive. A multiplicative seasonal effect is  assumed to be proportional to the level of the series. A sudden large increase in the level of the series will be accompanied by a proportionally large seasonal effect. In contrast, an additive seasonal effect is assumed to be unaffected by the level of the series. In times of relative economic stability, the multiplicative option is generally preferred over the additive option. However, in the presence of a large level shift in a time series, multiplicative seasonal adjustment factors can result in systematic over- or under-adjustment of the series; in such cases, additive seasonal adjustment factors are preferred since they tend to more accurately track seasonal fluctuations in the series and have smaller revisions. 

Most household data series that had outliers in April used multiplicative seasonal adjustment factors.  Therefore, BLS staff decided to specify all series with significant April outliers as additive. In accordance with the household survey’s usual practice, the seasonal adjustment models and factors will be reviewed at the end of the calendar year, when five years of seasonally adjusted estimates will be subject to revision. 

Job Revisions

The change in total nonfarm payroll employment for February was revised down by 45,000 from +275,000 to +230,000, and  the change for March was revised down by 169,000 from -701,000 to -870,000. With these revisions, employment changes in February and March combined were 214,000 lower than previously reported.

BLS Jobs Statistics at a Glance

  • Nonfarm Payroll: -20,500,000 - Establishment Survey
  • Employment: -22,369,000 - Household Survey
  • Unemployment: +15,938,000 - Household Survey
  • Involuntary Part-Time Work: +5,122,000 - Household Survey
  • Voluntary Part-Time Work: -8,246,000 - Household Survey
  • Baseline Unemployment Rate: +10.3 to 14.7% - Household Survey
  • U-6 unemployment: +14.1 to 22.8% - Household Survey
  • Civilian Non-institutional Population: +138,000
  • Civilian Labor Force: -6,432,000 - Household Survey
  • Not in Labor Force: +6,570,000 - Household Survey
  • Participation Rate: -2.5 to 60.2% - Household Survey

BLS Employment Report Statement

Total nonfarm payroll employment fell by 20.5 million in April, and the unemployment rate rose to 14.7 percent,  the U.S. Bureau of Labor Statistics reported today. The changes in these measures reflect the effects of the coronavirus (COVID-19) pandemic and efforts to contain it. Employment fell sharply in all major industry sectors, with particularly heavy job losses in leisure and hospitality.

Unemployment Rate – Seasonally Adjusted 

Nonfarm 2020-05A

The above Unemployment Rate Chart is from the BLS. Click on the link for an interactive chart.

Month-Over Month Changes by Job Type

Nonfarm 2020-05D

Hours and Wages

Average weekly hours of all private employees rose 0.1 hours to 34.2 hours. Average weekly hours of all private service-providing employees rose 0.5 hours to 33.4 hours. Average weekly hours of manufacturers fell 0.3 hours to at 40.4 hours.

Average Hourly Earnings of All Nonfarm Workers rose $1.34 to $30.01 . That's an amazing gain of 4.67%. 

Average hourly earnings of Production and Supervisory Workers rose $1.04 to $25.12. That's an amazing .32% gain.

Year-Over-Year Wage Growth

  • All Private Nonfarm rose from $27.81 to $30.01 a gain of 7.9%.
  • Production and supervisory rose from $23.33 to $25.12 a gain of 7.7%.

For a discussion of income distribution, please see What’s “Really” Behind Gross Inequalities In Income Distribution?

Birth Death Model

Starting January 2014, I dropped the Birth/Death Model charts from this report. For those who follow the numbers, I retain this caution: Do not subtract the reported Birth-Death number from the reported headline number. That approach is statistically invalid. Should anything interesting arise in the Birth/Death numbers, I will comment further.

I am prepared to comment further for the first time in over 6 years.

BLS Special Statement on the Birth-Death Model

The BLS changed the estimation method used in the establishment survey for April. Business births and deaths cannot be adequately captured by the establishment survey as they occur. Therefore, the establishment survey estimates use a model to account for the relatively stable net employment change generated by business births and deaths. Due to the impact of the COVID-19 pandemic, the relationship between the two was no longer stable in April. Therefore, the establishment survey made changes to the birth-death model. These changes include using a portion of business deaths reported by establishments in the estimation process. These business deaths are normally excluded from the estimation process. BLS also added a regression variable to the model for forecasting net business births and deaths. The regression variable added more recent information to the model, which typically relies on inputs only available on a lag of several months. The establishment survey also uses outlier detection as a usual part of the seasonal adjustment process. All outliers for seasonal adjustment are identified on a monthly basis in the establishment survey seasonal adjustment documentation.  

The Birth-Death model is officially garbage, much more than normal, but we likely will not find how distorted this is until the annual revisions next year.

Table 15 BLS Alternative Measures of Unemployment

Nonfarm 2020-05B

Table A-15 is where one can find a better approximation of what the unemployment rate really is.

Notice I said “better” approximation not to be confused with “good” approximation.

The official unemployment rate is 14.7%. However, if you start counting all the people who want a job but gave up, all the people with part-time jobs that want a full-time job, all the people who dropped off the unemployment rolls because their unemployment benefits ran out, etc., you get a closer picture of what the unemployment rate is. That number is in the last row labeled U-6.

U-6 is much higher at 22.8%. Both numbers would be way higher still, were it not for millions dropping out of the labor force over the past few years.

Some of those dropping out of the labor force retired because they wanted to retire. The rest is disability fraud, forced retirement, discouraged workers, and kids moving back home because they cannot find a job.

Strength is Relative

It’s important to put the jobs numbers into proper perspective.

In the household survey, if you work as little as 1 hour a week, even selling trinkets on eBay, you are considered employed.

In the household survey, if you work three part-time jobs, 12 hours each, the BLS considers you a full-time employee.

In the payroll survey, three part-time jobs count as three jobs. The BLS attempts to factor this in, but they do not weed out duplicate Social Security numbers. The potential for double-counting jobs in the payroll survey is large.

Household Survey vs. Payroll Survey

The payroll survey (sometimes called the establishment survey) is the headline jobs number, generally released the first Friday of every month. It is based on employer reporting.

The household survey is a phone survey conducted by the BLS. It measures unemployment and many other factors.

If you work one hour, you are employed. If you don’t have a job and fail to look for one, you are not considered unemployed, rather, you drop out of the labor force.

Looking for jobs on Monster does not count as “looking for a job”. You need an actual interview or send out a resume.

These distortions artificially lower the unemployment rate, artificially boost full-time employment, and artificially increase the payroll jobs report every month.

Final Thoughts

Once again, due Covid-19, this report does not properly reflect the massive amount of layoffs that have taken place.

Note the huge discrepancy between 

  • Employment: -22,369,000 - Household Survey
  • Unemployment: +15,938,000 - Household Survey

The difference is 6,431,000.

The BLS believes the unadjusted unemployment rate to be about 5 percentage points higher. That means 19.4% as opposed to 14.4%. 

Instead the BLS took 14.4%, factored in a doctored up Birth-Death model and concocted a seasonally-adjusted unemployment rate of 14.7%.

We will not find out how distorted this all is until the next set of annual revisions.

Lovey. 

Mish

Comments (49)
No. 1-23
RonJ
RonJ

Bloomberg: Gloom grips US small businesses, with 52% predicting failure

Casual_Observer
Casual_Observer

And the market rises again.

tokidoki
tokidoki

So you are telling me the Dow will reach 400K soon?

jivefive99
jivefive99

The political appointees at the top of the Labor Dept, under orders from you know who, were NEVER going to allow real numbers to be collected or released. They only allowed 14% to go thru because a) the media would report U-3 without commentary and b) you can only hide so much mess before someone starts demanding "recount!"

TimeToTest
TimeToTest

Statistics are getting so political.

Everywhere I look now statistics are politicized. I doesn’t help most people are terrible at math.

killben
killben

Markets are loving it! Up 300+ and Powell is a happy man. Atta boy, Powell!!

Sechel
Sechel

Question is what percentage get rehired. thought i read one survey that had it at 77%

Maximus_Minimus
Maximus_Minimus

The stock market is up on the disastrous news. Gee, who could possible have conditioned it to behave like this?

Sequoia
Sequoia

Do not forget the illegals. They cannot file for unemployment so figure 5-10 million more.

CautiousObserver
CautiousObserver

Now that Fed fund futures are predicting negative nominal rates, I just realized something. A debt problem really can be solved with more debt! The more that is borrowed, the less that must be paid back! Borrow a jazillion dollars, pay back a gazillion, and earn a bazillion. Easy money. It all makes sense now. Stocks to da moon! Who needs productive employment?

Six000mileyear
Six000mileyear

6 weeks ago my company announced merit pay increases and hiring would be frozen. Three weeks ago, my company announced 10% salary reduction PLUS 15 furlough days scattered the remainder of the year. Yesterday my company announced early retirement buyouts, accompanied by the threat of layoffs if enough people did not accept the offer. Personal budgets now have less for spending, and future unemployment looms. Based on the hit to the aerospace industry, my company will need to shrink its workforce by at least 25%. Some of the reduction will be masked by letting contractors go. Obviously the corporation does not believe re-opening is going to be business as usual. It's going to be a very rough next 3-5 years. I'm so glad I rent.

truthseeker
truthseeker

Normally in the past a terrible non farm payroll number would hurt stocks, yet these days stocks are helped as investors expect even more stimulus from the Fed which is totally out of control. One thing to watch here is the yield on the 30 year bond which has moved up from a low of .8370 to 1.367 as the Fed continues to print what happens if the yield here keeps moving up dramatically steepening the yield curve as the 30 year bond continues to sell off.

MATHGAME
MATHGAME

Does the household survey identify itself via caller-id? Because I rarely, if ever, will answer the phone unless it is a number or caller I recognize. Given the ridiculous number of unidentified robo-sales, robo-political, robo-scam? calls that I notice every day I'm WFH, it's the only sane approach.

Jackula
Jackula

I never thought in my lifetime I'd see numbers like this. This will cause worldwide political upheaval

Casual_Observer
Casual_Observer

I never believed employment numbers after each administration keep rigging them with more lies. Clinton, Bush, Obama and now Trump. The reason the market is going up is because it doesn't care about employment. Only about profits. Higher unemployment is good for some industries if productivity remains the same. I am betting on more machines replacing human beings this decade than ever before. Then the government will start counting robots as employed to jig the numbers again. Who needs humans when you have 7.7B of them. There will be blowback from all this again. I feel bad for the next generation that will have to find another planet to live on.

lol
lol

Why work when you can sit on your ass and get a nice check from big gov,handout from big gov,subsidy from big gov,bailout from big gov,loan from big gov,sit home smoke dope ,watch the Price is Right or play the lottery (or all 3)!!Those are the core tenets of Obamanomics...now Trumpnomics!

Casual_Observer
Casual_Observer

"We will not find out how distorted this all is until the next set of annual revisions."

But that won't matter as it is all backward looking. You told me in a comment recently the market doesn't look forward. I say otherwise. This market is strange in that it doesn't have to worry about the negative news because we know the pandemic will end sometime. So the market has room to run. Negative GDP ? It won't get worse. High unemployment ? That too will improve. Prove me wrong. This isn't a cyclical recession or slowdown. The secular economic factors of 1% GDP, 1% inflation and 1% FFR are firmly in place. It is easy to go from negative GDP to positive. But the next step up after early 2021 will be difficult. That is when the market will slow down.

Jojo
Jojo

People you wouldn't think were being laid off are getting hit. Like hospital workers. And want to wager that when some rehiring comes that the older workers are not going to be rehired first, if at all?

As Hospitals Lose Revenue, More Than A Million Health Care Workers Lose Jobs
May 8, 2020

Then there are companies like this one that are closing and will never reopen, costing, in this case, 4400 jobs. There is going to be a lot more long-term economic damage that apeears at this time.

Souplantation’s buffet-style restaurants closing for good due to the coronavirus
The Souplantation restaurants, founded in San Diego more than four decades ago, are closing permanently.
MAY 7, 2020

Jojo
Jojo

May 8, 2020, at 10:18 AM
The Terrible Jobs Report Gets Worse The More You Read It
By Amelia Thomson-DeVeaux and Julia Wolfe

Remember last month, when the jobs report was bad but not apocalyptic? Those were the days. The most recent jobs report is a stunning picture of how the pandemic has reshaped the country’s labor market. Overall, 20.5 million fewer people were employed last month than in March. And the unemployment rate has skyrocketed to 14.7 percent — by far the worst we’ve seen in more than seven decades of economic data.

But the speed of the crisis also means that these numbers are already out of date. The jobs report is based on surveys of businesses and households taken during the middle of April, but the economic situation likely worsened as the month went on. And key metrics, like the unemployment rate, aren’t capturing all the people who are actually out of work right now. According to this month’s report, millions of workers were counted as employed even though they were absent from work for an unspecified reason — and if they had been counted as unemployed on a temporary layoff, the unemployment rate would have been 5 percentage points higher. In other words, as catastrophic as this report might seem, it almost certainly understates the pandemic’s full economic devastation.
....

Webej
Webej

You should actually just compare the number of fulltime workers 25-55 years old as a proportion of of the population. It's simpler and more difficult to game, and makes historical and international comparisons easier. For instance, you would see at one blush that France has a higher proportion of employed than does the USA.

AWC
AWC

Statistics are meaningless in this brave new world of MMT. Only the Central Planners, and those insiders connected to them know the scheme. Everyone else is just trying to guess what TPTB are up to.

So, to get ya’ll’s gambling fix, jump into the “markets,” play the lottery, or head for Vegas. Although the latter probably offers better odds. ;-)

Herkie
Herkie

Another 2.981 million reported today, new total is 36.5 million.


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