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It was the Worst of Times

Market Intel / May 11, 2020

Credit: NASA Goddard Space Flight Center / CC BY 2.0  

With non-farm payroll employment dropping by 20.5 million, the April 2020 jobs report was the worst in my lifetime. Despite what the numbers are making glaringly obvious, it is difficult to comprehend such a massive collapse in our economy. Unlike some past reports, no sector proved immune to the effects of the shutdown. If you are looking for good news, go someplace else.

Headline numbers put the unemployment rate at 14.7%, up  from 4.4% last month. Unemployed people rose to 23.1 million, a one-month growth of 15.9 million. In some ways, this only tells part of the story, however, as people working part time, even though they would prefer to work full time, jumped to 10.9 million, nearly doubling the rate from last month. The length of time these individuals are in that status, brought back full time or furloughed, could add millions to employment losses. Further, 6.4 million dropped out of the labor force last month. Had they remained on the rolls, the unemployment rate would have reached nearly 20%.

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Again, every sector showed significant job losses. The largest in absolute numbers was leisure and hospitality, shedding 7.6 million positions. In April last year, the industry employed 16.5 million. In April of this year, that figure fell to 8.7 million. Within the leisure and hospitality block, the hardest hit has been the amusements, gambling and recreation subsector, with nearly 60% of the jobs gone from last year. From Disney to the Bellagio, the emptiness is eerie.  But the numbers for food services and drinking establishments are staggering. With 5.5 million jobs lost, it is the largest single subsector in absolute numbers across the board. Take-out may be keeping a few people employed, but with the dining room closed, you don’t need much in the way of waitstaff. And alcohol-purchasing laws tend to work against take-out from bars.

Surprisingly, the health care sector has also been hit hard. Overall, health care employment slipped by 2.1 million positions. Dentist office employment in particular has taken a blow, dropping 503,000 jobs compared to overall employment of 977,000 as recently as February of this year. Also somewhat strange, hospital workers only lost 134,000 jobs out of 5.1 million. With elective surgeries on hold, there have been several reports lately of hospitals facing bankruptcy as COVID-19 cases are not filling up floors. Orthopedic floors, for example, are just sitting empty. Keeping all that staff on the books with zero revenue will be a strain on many facilities.

Construction shed 975,000 positions, mainly in the specialty trades. Manufacturing jobs slipped by 1.3 million, with two-thirds of that coming in the durable goods category. Between fabricated metals and motor vehicles and parts, 490,000 jobs fell off the books, over half of the durable goods jobs lost. On the nondurable manufacturing side, numbers slipped by 416,000 – which was only 9% of the total. Within that area, food manufacturing was down only 5%. Apparel jobs, however, fell by more than 40%.

This apparel category carries on up through the retail sector. Retail employment overall was down 13%, shedding 2.1 million jobs. Clothing and clothing accessories stores’ employment fell by 58%. Similarly, furniture and home furnishings slid 45%. Food and beverage store employment dropped, but only by 1%. One semi-strange point under retail, the “general merchandise stores,” which include Walmart, Costco, etc., actually boosted employment by 93,000 positions, a 5% bump.

Two final things in this dismal, dismal report. First is government employment, which dropped 980,000 positions this month, all at the state and local level. Federal employment was unchanged. States cut 180,000 jobs, almost entirely in the education category. Local government employment dropped by 801,000, but unlike the state level, 469,000 of those jobs were in education and another 332,000 were in “excluding education” positions. Local government has been a drag on overall employment levels for several years after the last recession, only boosting employment in the previous few quarters. Right or wrong, it will probably be years before local government employment gets back to where it was in February 2020.

Let us turn to hourly earnings to close out this report. The average hourly earnings of production and nonsupervisory employees rose by 7.7% in April. Do not be deceived. We dropped 8 million people from the calculation who had an average hourly wage of $14.63. The 7.7% rise was not a surge in pay, but rather a removal of a large number of individuals at the bottom end of the wage scale.

I genuinely hope I never see another jobs report like this one. We will have reports in the future showing significant positive gains, probably not as positive as this was negative, but we will have improvements. Look at the dentistry category, for example. Reopen those offices, and people will look forward to going to the see the dentist, just to get out of the house.

Bob Young
Agricultural Prospects

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