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Notes on the U.S. Employment Situation for September 2020

Analysis by Frank Conte 

OVERVIEW

• The unemployment rate dropped to 7.9 percent in September with payrolls increasing by 661,000 jobs, according to the Bureau of Labor Statistics.  
• The number of unemployed persons fell by 1 million to 12.6 million. 
• The Labor Force Participation (LFP) declined in September to 61.4 percent. The Employment-Population ratio changed little at 56.6 but is 4.5 percentage points lower than February 2020 (61.1 percent).  
• Despite declines in LFP and Employment-Population in the last five months, both measures are lower than in February. 
• The unemployment rates declined among all major worker groups. However, teenagers faced the highest unemployment at 15.9 percent.
• In September, notable job gains took place in the leisure and hospitality, retail trade, health care and social assistance, professional and business services. 
• In September, the number of persons who work part time declined by 1.3 million. At 7.2 million, the number of persons not in the labor force remains 2.3 million higher than February.  
• Average hourly earnings for private sector workers rang in at $29.47. The average workweek for all employees rose by 0.1 hour to 34.7 hours. 
• Reports for the two previous months were revised upward. The payrolls report for August changed by 118,000 from 1.371 million to 1.489 million while the change for July was revised up by 27,000 from 1.734 million to 1.761 million.
• Leisure and hospitality increased by 318,000. Yet employment in the food services and drinking places sector is down 2.3 million since February. 
• No sector has turned its employment around since last September. (See Chart A.)

ANALYSIS

The September report will be the last before next month’s elections which may weigh heavily on voters. Although today’s headline number beat Wall Street estimates of 8.6 percent, employment isn’t recovering quick enough. 

“The U.S. Jobs Recovery Is Sputtering,” declared the Wall Street Journal that best captures the fading hope of a V-shaped recovery. 

The private economy generated 877,000 jobs. In contrast this week’s ADP National Employment survey reported a gain of 749,000 private jobs. 

Scattered through today’s report are troubling signs. The number of permanent job losers increased by 345,000 to 3.8 million and according to the BLS, “this measure has rise by 2.5 million since February.”  Long-term unemployment showed no improvement. 

The long-term jobless (unemployed for more than 27 weeks) increased by 781,000 to 2.4 million.  

The number of involuntary part-time workers is 2.0 million higher than the onset of the pandemic in February. September showed a decrease but that’s the result of a cut-back in hours. 

“Permanent jobs losses rose by more than 300,000. That’s not a good thing. The labor force participation rate declined, which pulled the overall unemployment rate down. That’s not a good sign, either,” said Kathy Jones, head of fixed income at Charles Schwab told CNBC. “We’re looking at state and local government layoffs, we’re looking at a higher level of permanent job losses and more people leaving the workforce. None of that is good for the long run.” 

Indeed a look over the horizon isn’t promising. American Airlines indicated this week that it plans to furlough 19,000 workers. The COVID-19 lockdown has also squeezed the joy of amusement and fun. Disney announced on Wednesday that plans to lay off nearly 28, 000 domestic workers, some of whom have been on furlough since April. The financial sector is also expected to worsen as Allstate revealed it will part ways with 3,800 workers. Government employment offers no rebound — dropping by 216,000. The battered retail sector added jobs but since February it shed 483,000.jobs. Average hourly earnings of private payrolls changed little month over month settling at $29.47, a rise of two cents.

CHART A

CHART B

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Suggested reading: Munger on Alesina, etl on Austerity

Over at EconLib.org, Michael Munger reviews Alesina et.al. Here's an excerpt:

"So, austerity is a second best policy, contingent on a particular kind of government failure. Alesina et al note that the effectiveness of austerity is controversial, with the discussion in the press “often taking a very ideological, harsh, and unproductive tone.” (page 3) The reasons given for why austerity should be selected by a government, or should be imposed as a condition of extension of loans by creditors, are obvious: (a) the ratio of debt to GDP has grown perilously large, raising questions about whether even the existing debt can be repaid, and (b) crises, fiscal needs arising from wars or major economic downturns in the business cycle or in currency exchange markets.

The critics claim that austerity is a moralistic, punitive policy designed to cause pain for excess deficits, one that fails even on its own logic because it actually pushes debt to GDP ratios higher rather than lower. The argument is that GDP shrinks sharply as government spending is cut, and even if debt falls, GDP falls by more which worsens the problem and causes an economic storm. 

In a way, that’s the end of the story. Because Alesina, et al. are able to give a decisive resolution to the controversy: not all austerities are the same. In fact, there are two very different types: a focus on raising taxes, and a focus on cutting spending. When it comes to imposing an austerity of “sharply increased taxes” variety, the anti-austerity activists probably have the best of it. But when the austerity takes the form of large-scale cuts, not just in budgets but in entire programs, the larger weight of evidence by far falls on the “austerity works” side of the scale."

Read the whole review here.  

Notes on the U.S. Employment Situation for March 2020: Unemployment rate 4.4%, Payrolls decline by 701,000

Frank Conte

OVERVIEW

• The unemployment rate rose to 4.4 percent in March with payrolls decreasing by 701,000 jobs, according to the Bureau of Labor Statistics. 
• The Labor Force Participation (LFP) declined to 62.7 percent. The Employment-Population ratio dropped to 60.0 percent reflecting a drop of 1.1. percentage points over the month. The number of unemployed persons rose by 1.4 million to 7.7 million.
• The increases in unemployment rates rose among all major worker groups.
• The most notable job losses hit food and drinking establishments with 417,000; the hospitality industry lost 29,000 jobs.
• Employment in health care and social assistance fell by 61,000 in March. 
• In March, the retail trade sector lost 46,000 jobs. However, general merchandise stores gained 10,000 jobs.
• In March, construction shed 29,000 jobs; the other services category saw a decline
• of 24,000 jobs. Mining lost 6,000 jobs in March and manufacturing lost 18,000 jobs.
• Employment in other major industries--including wholesale trade, transportation and warehousing, information, and financial activities--showed little change in March.
• Over the year, average hourly earnings have increased by 3.1 percent. In March, the average hourly private nonfarm wage rose by 11 cents to $28.62. The average workweek for all employees dropped by 0.2 of an hour to 34.2 hours.
• Revisions for the previous two months pushed the original estimates downward by 59,000. The payrolls report for January was revised down from +273,000 to +214,000 while the change for February was revised up by 2,000 from +273,0000 to +275,000. After these revisions, job gains have averaged 245,000 for January and February.

ANALYSIS

The key indicator in this month’s payrolls report is in the annotation from the Bureau of Labor Statistics. “March data from the establishment and household surveys broadly reflect some of the early effects of the COVID-19 pandemic on the labor market… It is important to keep in mind that the March survey reference periods for both surveys predated many coronavirus-related business and school closures in the second half of the month.”

That’s significant as the April and May numbers will continue to crater. The U.S. 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, according to the BLS.

Wall Street braced for fewer jobs losses, in a dramatic under-count; it expected a loss of 100,000 jobs. On Wednesday, ADP counted only a loss of 27,000 private jobs compared with the 713,000 private sector jobs lost, a variance that should keep statisticians busy. However, the number that will stick —more or less until next month’s payrolls revision— is a historic 701,000 jobs lost. Here too lies a variance. According to the household survey, the number of unemployed persons rose by 1.4 million. 

There is hardly a slither of good news in today’s survey — perhaps in the 11 cents per hour increase in average hourly wages. Or maybe in the addition of 10,000 jobs in the merchandise retail sector which provides no solace as that front-line work is now high-risk.

“Today’s numbers are shockingly bad and an understatement of the damage already done to the U.S. economy,” said Nick Bunker, economic research director at job search site Indeed. “If this is an indication of what was happening before the full force of the crisis hit, then it will be hard to come up with the words to describe the numbers in future months.” That scenario is a sure-thing. According to the Wall Street Journal, more than 6 million workers have thus far filed for unemployment. That was twice the number of those who filed two week earlier. (See Figure 1).

ZeroHedge summed it up grimly, “And now we brace for April, when the really ugly number will be revealed, and when according to some, the US economy may lose as many as 10 million jobs.” 

Not good.


What can we expect? All are betting on a recession given the onslaught of job losses. Restoring all the jobs lost is difficult to predict. But past recessions (See Figure 2) may or may not provide a guide. 

Figure 1.

Figure 2.

Source: Federal Reserve Bank, Employment (000s); National Bureau of Economic Research

Massachusetts Unemployment and Job Estimates for January 2020; URate 2.8%; YoY payrolls 33,400

This just in from the Executive Office of Labor and Workforce Development:

BOSTON, MA (March 13, 2020)– The state’s January total unemployment remained unchanged at 2.8 percent for the sixth consecutive month following on the Bureau of Labor Statistics’ annual revisions, the Executive Office of Labor and Workforce Development announced Friday.

The Bureau of Labor Statistics’ preliminary job estimates indicate Massachusetts added 11,800 jobs in January. Over the month, the private sector added 11,100 jobs as gains occurred in Trade, Transportation, and Utilities; Education and Health Services; Professional, Scientific, and Business Services; Financial Activities; Leisure and Hospitality; Other Services; Information; Construction; and Manufacturing.

From January 2019 to January 2020, BLS estimates Massachusetts added 33,400 jobs. 

The January unemployment rate was eight-tenths of a percentage point lower than the national rate of 3.6 percent reported by the Bureau of Labor Statistics.

"Following year-end revisions, BLS now estimates Massachusetts added 33,400 jobs over the year. In addition to those job gains, the labor force increased by 27,000 from last year’s level, with 39,400 more residents employed and 12,300 fewer residents unemployed," Labor and Workforce Development Secretary Rosalin Acosta said.

The labor force increased by 1,900 from 3,834,300 in December, as 2,300 more residents were employed and 400 fewer residents were unemployed over the month.

Over the year, the state’s seasonally adjusted unemployment rate dropped three-tenths of a percentage point.

The state’s labor force participation rate – the total number of residents 16 or older who worked or were unemployed and actively sought work in the last four weeks – remained unchanged at 67.9 percent. Compared to January 2019, the labor force participation rate is up two-tenths of a percentage point. 

The largest private sector percentage job gains over the year were in Information; Education and Health Services; Professional, Scientific, and Business Services; and Construction.

Annual revisions to the job estimates show growth was greater than previously published for 2018 and less in 2019.  In 2018, 42,700 jobs were added over the year.   In 2019, estimates indicate 26,100 jobs were added over the year.  BLS annually updates job estimates for each state with the most up-to-date information supplied by employers.

Annual year-end revisions show the unemployment rates were slightly lower than the previously published estimates for August 2019 through November 2019. The labor force estimates were lower than previously published estimates for 2015 to 2019.

January 2020 Employment Overview

Trade, Transportation and Utilities added 3,400 (+0.6%) jobs over the month. Over the year, Trade, Transportation and Utilities gained 2,900 (+0.5%) jobs.

Education and Health Services added 2,000 (+0.2%) jobs over the month. Over the year, Education and Health Services gained 11,700 (+1.4%) jobs. 

Professional, Scientific and Business Services added 1,600 (+0.3%) jobs over the month. Over the year, Professional, Scientific and Business Services gained 7,000 (+1.2%) jobs.

Financial Activities added 1,100 (+0.5%) jobs over the month. Over the year, Financial Activities gained 1,300 (+0.6%) jobs.

Leisure and Hospitality added 800 (+0.2%) jobs over the month. Over the year, Leisure and Hospitality gained 2,100 (+0.6%).

Other Services added 800 (+0.6%) jobs over the month. Over the year, Other Services are up 100 (+0.1%) jobs.

Information added 600 (+0.6%) jobs over the month. Over the year, Information gained 3,600 (+3.9%) jobs.

Construction added 500 (+0.3%) jobs over the month. Over the year, Construction has added 1,000 (+0.6%) jobs.

Manufacturing added 300 (+0.1%) jobs over the month. Over the year, Manufacturing lost 1,500 (-0.6%) jobs.

Government added 700 (+0.2%) jobs over the month. Over the year, Government gained 5,200 (+1.1%) jobs.

Labor Force Overview

The January estimates show 3,729,900 Massachusetts residents were employed and 106,200 were unemployed, for a total labor force of 3,836,100. The unemployment rate remained steady at 2.8 percent. The January labor force increased by 1,900 from 3,834,300 in December, as 2,300 more residents were employed and 400 fewer residents were unemployed over the month. The labor force participation rate, the share of working age population employed and unemployed, remained unchanged at 67.9 percent. The labor force was up 27,000 from the 3,809,100 January 2019 estimate, with 39,400 more residents employed and 12,300 fewer residents unemployed.

Detailed labor market information is available at www.mass.gov/lmi.

Consumer responses to COVID-19 -- Friday, March 13, 2020: Scenes from the rush to stock up, Danvers and Middleton

Shoppers pretty much cleared out the tomato sauce aisle at MarketBasket in Middleton

The oil glut is showing up at the pump. 

The line at the Costco in Danvers was at least 100 yards long

US EMPSIT U-Rate: 3.5% with +273,000 new payroll jobs

OVERVIEW

• The unemployment rate fell to 3.5 percent in February with payrolls expanding by 273,000 jobs, according to the Bureau of Labor Statistics.  
• The Labor Force Participation (LFP) edged up to 63.4 percent. The Employment-Population ratio remained essentially unchanged at 61.1 percent but registered 0.4 of a percentage-point over the year.
• Notable job gains took place in Health Care & Social Assistance (+57,000) Food Services and Drinking Places (+53,000), Government (+45,000), Construction (+42,000), Financial Services (+26,000) and Professional & Technical Services (+32,000).
• The following sectors saw little or no change in February: Mining, Wholesale Trade, Retail Trade, Information, and Transportation and Warehousing. 
• While both the number of unemployed persons and the unemployment rate remained unchanged, the rate has held steady between 3.5 percent and 3.6 percent for the last six months. 
• Over the year, average hourly earnings have increased by 3.1 percent. In February, the average hourly private nonfarm wage rang in at $28.52. The average workweek for all employees rose by 0.1 hours rising slightly to 34.4 hours. 
• The number of long-term unemployed (27 weeks or more) fell to 1.1. million, representing 19.2 of all the unemployed.  Meanwhile, 1.4 million workers identified as “marginally attached to the labor force” remained unchanged in February.
• Revisions for the previous two months pushed the original estimates upward by 85,000. The payrolls report for December was revised from +147,000 to +184,000 while the change for January was also revised up from +225,000 to +273,000. After these revisions, job gains have averaged 243,000 over the last three months.

ANALYSIS

Lost in all of the crisis reporting about the global spread of COVID-19, last Friday’s jobs report is a bright spot in the news cycle.  

The happy news is so much of an orphan that even the payroll-watching Drudge Report has opted to skim over the historic low unemployment rate. (See this link to the estimable Drudge Report’s focus on COVID-19 at the expense of Trumpian good news).  

At a healthy 273,000 print, this most recent payrolls number outstripped Wall Street estimates of 193,000.

 “A home run; a blowout number,” say the well-informed. The even-more estimable ADP lagged the buoyant BLS numbers. According to ADP report released on Wednesday, the private sector generated 183,000 jobs. The BLS private sector number was 228,000.  

So here’s another big question: Have we reached peak job creation? The coronavirus is considered as the convenient excuse for the oncoming recession most would like to avoid. It is also an excuse for the stock market correction that has been desirable in some quarters. Even the bears are right once in a while.

But what counts is the jobs market. “The outbreak will likely lead (businesses) to postpone some hiring plans or even shed jobs if the situation worsens,” said Lydia Boussour, senior U.S. economist at Oxford Economics. How much of a shock will only be determined, as is practice, months from now. 

"This is quite an insurance policy," remarked former Barron's columnist Jim McTague. “It shows that going into this infection, the economy is about as good as you can ever hope for it to be."  

In related news, the Bureau of the Census and the Bureau of Economic Analysis reported that  January exports were $208.6 billion, $0.9 billion less than December exports. January imports were $253.9 billion, $4.2 billion less than December imports (See Figure 1).  

Here too the effects of the coronavirus are not fully known. But it appears for the present time that domestic production and consumption is at happy spot, at least politically.  

The Massachusetts unemployment rate remains lower than the national average. In December 2019, the Massachusetts rate fell to 2.8 percent with the national rate for the same month at 3.5 percent. See Figure 2. 

Notes on the U.S. Employment Situation for January 2020: U-Rate: 3.6 %; Payrolls up +225,000

OVERVIEW

• The unemployment rate rose to 3.6 percent in January with payrolls expanding by 225,000 jobs, according to the Bureau of Labor Statistics. 
• The Labor Force Participation (LFP) edged up to 63.4 percent with 574,000 workers joining the civilian labor force. The Employment-Population ratio moved up slightly to 61.2 percent and registered 0.5 of a percentage point gain over the year.
• Notable job gains took place in Construction (+44,000), Health Care (+36,000) and in Transportation and Warehousing (+23,000).
• Employment in Leisure and Hospitality (+36,000) continued to rise consistent with year-over-year trends. Over the past six months, the industry added 288,000 jobs.
• According to the BLS, the following sectors saw little or no change in January: Mining, Wholesale Trade, Retail Trade, Information, Financial Activities and Government.
• Over the year, average hourly earnings have increased by 3.1 percent. In January, the average hourly private nonfarm wage rang in at $28.44. The average workweek for all employees was unchanged at 34.3 hours.
• The number of long-term unemployed (27 weeks or more) remained at 1.2 million in January as it did in December. Meanwhile, 1.3 million workers identified as “marginally attached to the labor force” remained unchanged in today’s report.
• Revisions for the previous two months pushed the original estimates upward by 7,000. The payrolls report for November was revised from +256,000 to +261,000 and the change for December was also revised up from +145,000 to +147,000. After these revisions, job gains have averaged 211,000 over the last three months.

ANALYSIS

Today’s jobs report marks the finish line of Trump’s extraordinary week.  The state of the employment picture is stellar and strong -- impervious to any impeachment noise. 

Earlier in the week, ADP reported a gain of 291,000 private sector jobs, one of the payroll firm’s highest gains. Today, the BLS reported a gain of 206,000 private sector jobs. 

Moreover, wages are continuing their climb -- putting more money in the pockets of American workers. 

Wall Street expected a payroll increase of about 165,000 jobs.  Today’s report blew past that number with 225,000 jobs. The unemployment rate increased particularly because more people entered the workforce. 

According to Bloomberg, “…the [labor force] gain reflects the highest participation in almost two decades among prime-age women who are 25 to 54, called that because the years are key for career-building.” 

Bloomberg also noted that number mostly reflected the entrance of millennial workers. 

There is little downside in today’s payrolls report but some gloom in a side report from BLS where annual revisions eliminated a half million jobs from earlier counts from previous years. 

The high-profile and once-recovering Manufacturing sector remains stuck, unable to move in any direction in the last 12 months. 

Revisions to the previous months (an important measure to identify trends) show an actual increase of 7,000. “The report is unambiguously good,” said Ed Campbell, portfolio manager at QMA. “Strong growth and decent but not runaway wage growth should be good for stocks.” 

All this good news arrives in the context of global uncertainty over the Wuhan coronavirus and it is unclear when the effects work their way through the supply chain.  

Another question remains whether this impressive job growth is sustainable given Boeing’s 727 Max problems. 

For now, the job picture has rarely been brighter and brighter still for President Trump.“If the job market continues to perform as it is today on election day, it should be a tailwind to the president’s re-election,” Mark Zandi, chief economist at Moody’s Analytics told Bloomberg.  

But as Zandi also noted, the real jobs picture focuses on how well workers fare in the swing states come November 2020. 

Conte Consulting:  

Editorial Services | Web Content Design & Management |Public Policy Analysis

On my reading list: Selected papers

Some collected readings for my list. 


Julian Reiss. The Methodology of Positive Economics: Reflections on the Milton Friedman Legacy, ed. Uskali Mäki. Cambridge: Cambridge University Press,  Link.

Pablo D. Fajgelbaum, Pinelopi K. Goldberg, Patrick J. Kennedy and Amit K. Khandelwal. The Return to Protectionism. Link.

Gilbert Cette, Lorraine Koehl, Thomas Philippon. Labor Shares in Some Advanced Economies. Link.

Grace Weishi Gu, Eswar Prasad. New Evidence on Cyclical Variation in Labor Costs in the U.S. Link.

Robert J. Gordon. Friedman and Phelps on the Phillips Curve Viewed from a Half Century's Perspective. Link. 

Andrew B. Hall, Jesse Yoder. Does Homeownership Influence Political Behavior? Evidence from Administrative Data. Link.

Anna Maria Mayda, Giovanni Peri, Walter Steingress. The Political Impact of Immigration: Evidence from the United States. Link.

Patrick Bajari, Victor Chernozhukov, Ali Hortaçsu, Junichi Suzuki. The Impact of Big Data on Firm Performance: An Empirical Investigation. Link. 

Jared Walczak, Tax Trends at the Dawn of 2020. Tax Foundation. Link.

David Neumark, Peter Shirley. The Long-Run Effects of the Earned Income Tax Credit on Women's Earnings. Link.

David Autor, David Dorn, Lawrence F. Katz, Christina Patterson, John Van Reenen. Concentrating on the Fall of the Labor Share. Link.

David Autor, David Dorn, Lawrence F. Katz, Christina Patterson, John Van Reenen. The Fall of the Labor Share and the Rise of Superstar Firms. Link.

Murray Rothbard. Robert Nozick and the Immaculate Conception of the State. Link.

Austan Goolsbee. Public Policy in an AI Economy. NBER. Link. 

Dani Rodrik. What Do Trade Agreements Really Do? Link. 

Notes on the December 2019 U.S. Employment Situation: U-Rate 3.5%; Payrolls +145,000

OVERVIEW

• The unemployment rate remained at 3.5 percent in December with payrolls expanding by 145,000 jobs, according to the Bureau of Labor Statistics. 
• The Labor Force Participation (LFP) was unchanged little at 63.2 percent. The Employment-Population ratio also remained at 61.0 percent for the fourth consecutive month.
• Notable job gains took place in Retail (+41,000) and Health Care (+28,000).
• Employment in Leisure and Hospitality continued to rise consistent with year-over-year trends. In 2018, the sector added 359,000 jobs; in 2019 it added 388,000 jobs.
• According to the BLS, the following sectors saw little or no change in December: Wholesale Trade, Information, Financial Activities and Government.
• Unemployment among the major worker groups remained low and generally unchanged.
• Over the year, average hourly earnings have increased by 2.9 percent. In December, the average hourly private non-farm wage rang in at $28.32. The average workweek for all employees was unchanged at 34.3 hours.
• The number of persons employed part-time changed little in December at 4.1 million.
• The number of long-term unemployed (27 weeks or more) remained at 1.2 million in December. Meanwhile, those workers who are “marginally attached to the labor force” fell by 310,000.
• Revisions for the previous two months pushed the original estimates downward. The payrolls report for October was revised down by 4,000 from +156,000 to +152,000 and the change for November was revised down by 10,000 from +266,000 to +256,000. After revisions job gains have averaged 184,000 over the last three months.

ANALYSIS

Is the U.S. job creation machine running out of gas? And has wage growth taken a pause? In 2019, payroll employment rose by 2.1 million down from again of 2.7 million in 2018 even as the unemployment rate fell from 3.9 percent in 2018 to 3.5 percent in 2019, entering the record books as a half-century low. 

Key sectors may underlie the possible slowdown. Construction employment changed little in December: up 20,000. Notable however, is that employment in the sector rose by 151,000 in 2019, about half of the 2018 gain of 307,000. Manufacturing was also little changed in December +12,000. Specifically, Manufacturing changed little in 2019; +46,000 compared to the solid 264,000 figure in 2018. Mining, which covers the volatile oil extraction sector, declined by 8,000 in the month; it declined 24,000 after rising by 63,000 in 2018.

Earlier in the week, ADP, the payroll firm, reported a gain of 202,000 private sector jobs. Today the BLS reported a gain of 139,000. The revisions in today’s report put a dent in last month’s stellar print. Revisions for the two previous months took 46,000 jobs out of the original, rosier estimate. Wall Street expected a payroll increase of about 160,000 jobs. Average hourly earnings slowed down in December rising 3 cents.

Still, the report was good enough to Lawrence Kudlow, director of the U.S. National Economic Council. Citing an expected trade deal with China, improving business confidence and the stock market, Kudlow remained optimistic. He told Bloomberg, “the fact remains that the production workers’ and the service workers’ gains in wages continue to outstrip the gains of their managers.” Excluding the Natural Resources and Mining sector, an outlier, Retail Trade wages grew the fastest at 4.2 percent (See Table 1). And while the Construction and Manufacturing sectors generated fewer jobs in December, wages in both sectors continued to grow.