Unemployment Rate Jumps to 4.4% But Worst is Yet to Come

Mish

The unemployment rate jumped to 4.4% in March, but the stat is more than a bit misleading. Things will get much worse.

​​Initial Reaction

The headline jobs number fell by 701,00. The Econoday forecast was -150,000 jobs. But none of the numbers reflect the surge in unemployment claims in the last two weeks.

As noted yesterday today's Jobs Report Will Look Far Better Than It Really Is

In the household survey, the reference period is generally the calendar week that contains the 12th day of the month. In the establishment survey, the reference period is the pay period including the 12th, which may or may not correspond directly to the calendar week.

The mass layoffs mostly started after the BLS competed its surveys.

Forget about -701,000. There are at least 10 million more unemployed than reported today.

The BLS provided this note today.

In March, the unemployment rate increased by 0.9 percentage point to 4.4 percent. This is the largest over-the-month increase in the rate since January 1975, when the increase was also 0.9 percentage point. The number of unemployed persons rose by 1.4 million to 7.1 million in March. The sharp increases in these measures reflect the effects of the coronavirus and efforts to contain it.

Measures from the household survey pertain to the week of March 8th to March 14th.

Government Workers

Federal government employment rose by 18,000 in March, reflecting the hiring of 17,000 workers for the 2020 Census.

Job Revisions

The change in total nonfarm payroll employment for January was revised down by 59,000 from +273,000 to +214,000, and the change for February was revised up by 2,000 from +273,000 to +275,000. With these revisions, employment gains in January and February combined were 57,000 lower than previously reported.

BLS Jobs Statistics at a Glance

  • Nonfarm Payroll: -701,000 - Establishment Survey
  • Private Nonfarm Payroll: -713,000 - Establishment Survey
  • Employment: -2,987,000 - Household Survey
  • Unemployment: +1,353,000 - Household Survey
  • Involuntary Part-Time Work: +1,267,000 - Household Survey
  • Voluntary Part-Time Work: -1,574,000 - Household Survey
  • Baseline Unemployment Rate: +0.9 to 4.4% - Household Survey
  • U-6 unemployment: +1.7 to 8.7% - Household Survey
  • Civilian Non-institutional Population: +130,0000
  • Civilian Labor Force: -1,633,000 - Household Survey
  • Not in Labor Force: +1,763,000 - Household Survey
  • Participation Rate: -0.7 to 62.7% - Household Survey

BLS Employment Report Statement

Total nonfarm payroll employment fell by 701,000 in March, and the unemployment rate rose to 4.4 percent, the U.S. Bureau of Labor Statistics reported today. The changes in these measures reflect the effects of the coronavirus (COVID-19) and efforts to contain it. Employment in leisure and hospitality fell by 459,000, mainly in food services and drinking places. Notable declines also occurred in health care and social assistance, professional and business services, retail trade, and construction.

Unemployment Rate – Seasonally Adjusted

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

Hours and Wages

Average weekly hours of all private employees fell 0.2 hours to 34.2 hours. Average weekly hours of all private service-providing employees fell 0.3 hours to 33.0 hours. Average weekly hours of manufacturers fell 0.3 hours to at 40.4 hours.

Average Hourly Earnings of All Nonfarm Workers rose $0.11 to $28.62 . That's a gain of 0.39%.

Average hourly earnings of Production and Supervisory Workers rose $0.10 to $24.07. That's a 0.42% gain.

Year-Over-Year Wage Growth

  • All Private Nonfarm rose from $27.76 to $28.62 a gain of 3.1%.
  • Production and supervisory rose from $23.28 to $24.07, a gain of 3.4%.

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.

Table 15 BLS Alternative Measures of Unemployment

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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 4.4%. 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 8.7%. 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 to the survey week, this report does not properly reflect the massive amount of layoffs that have taken place.

We will know more in the next couple of weeks as the weekly unemployment claims pile up. I expect the unemployment rate will jump to at least 12% and more likely something closer to 20%.

The US unemployment rate which takes into consideration involuntary part-time work may surge as high as 40%. The consequences will be severe and there will not ve a V-shaped recovery.

A deep recession is coming up.

For discussion, please see Covid-19 Recession Will Be Deeper Than the Great Financial Crisis

Mike “Mish” Shedlock

Comments (37)
No. 1-14
Sechel
Sechel

I expect companies to use this as an opportunity to fire workers and groups of workers they couldn't before. Company may have had a product line barely covering variable costs, there could have been political costs to shutting down a factory givne the current environment. in some cases the virus is the perfect pretext to clean house.

Tony Bennett
Tony Bennett

"The consequences will be severe and there will not ve a V-shaped recovery."

...

Yes.

Now we wait for the inevitable SNAFU when government bureaucracy meets need to get passed fiscal stimulus out the door ASAP.

Coupled with massive fraud as anything rushed will provide the unscrupulous scammers a plethora of opportunities to game.

njbr
njbr

CBO projects unemployment at 9%+ at the end of 2021. That is 1980's territory with a long way back to worse...

QE2Infinity
QE2Infinity

A 20% unemployment rate, Yikes! Expect the goverment to lavish resources on the unemployed in a massive vote buying scheme. FDR was the master of this.

MATHGAME
MATHGAME

It seems apparent that the vast majority of folks on this discussion board are aware of (or should I say convinced of just in case we're all mistaken) the rampant corruption in the US government, economic, financial, and other "systems".

While I can understand why the majority of that majority might still choose to live here (though some may have chosen to leave for other lands or actually live there), it seems especially curious to me why so many still seem passionately involved in and concerned with the corrupt casinos that virtually all so-called "free markets" have deteriorated into?

WildBull
WildBull

It looks like they waited until almost April to close everything so that Q1 would be a good quarter. Pres. Trump mentioned something about a second wave of C19 in the fall. Perhaps the plan is to knock C19 down in Q2, Have a rebound in Q3, over which prep is made for greater numbers of sick people, then burn C19 out in Q4. Hopefully someone is thinking about the economic fallout from all this.

On another note, the FDA has approved a COVID 19 antibody test. This will allow people to know if they've had the virus already, and allow the total number of people that have had the virus to be estimated. I believe that I came down with it on Feb 10. It was not a fun two weeks. If so, I'd like to donate blood for antibodies, which is a treatment option that is being investigated, or help somewhere else in some other way.

Six000mileyear
Six000mileyear

GE is furloughing half of its jet engine manufacturing staff. That means Pratt-Whitney can't be that far behind.

Sunriver
Sunriver

Civil unrest is the obvious outcome.

NewUlm
NewUlm

Don't forget all the corporate layoffs coming in Q2, they held off in March so they can take the severance hits in Q2 as they massively lower Q2 rev and earnings. I agree 12% is the base case.

IGA
IGA

-700,000 is not the headline. The household survey dropped 3 million jobs. 1.4 unemployed but 1.6 dropped out of the labor force. Unemployment rate would have been over 5 without that.

lol
lol

US unemployment reaching 3rd world levels,Reality is DC has only 2 real options,cut everyone a unemployment check,or declare martial law and confiscate guns,there just aren't enough prison beds when TSHTF!

Haxo Angmark
Haxo Angmark

US gubmint "unemplyment" #'s have no more facticity than gubmint price inflation and GDP #'s. Real unemployment right now is c. 20%...and I am one of the millions currently uncounted. Actual unemployment, thanks to this full-frontal attack of (((Wall Street))) on Main Street, will go to c. 40%.


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