There has never been a monthly employment report like the one, for April, that the Labor Department released on Friday morning. The figures in the report are based on two surveys: a survey of households, which the Census Bureau carries out; and a survey of businesses, which the Bureau of Labor Statistics carries out. “The household survey is generally collected through in-person and telephone interviews, but personal interviews were not conducted for the safety of interviewers and respondents,” the report noted. The regional call centers that conduct the business survey were closed last month, but some of the interviewers worked from home, and the department encouraged firms to file their payroll reports electronically. As a result of these efforts, the amount of data that the business survey collected was “essentially unchanged from collection rates prior to the pandemic,” the report said.
In other words, the B.L.S. did yeoman’s work in tough circumstances, and its report provided the most comprehensive picture yet of how the coronavirus shutdowns have affected the economy. The headline figures were that the unemployment rate jumped from 4.4 per cent to 14.7 per cent in April, and the number of employees on firms’ payrolls fell by 20.5 million. Both of these jumps were unprecedented in scale. In October, 2009, following the great financial crisis, the unemployment rate peaked at ten per cent. In November and December, 1982, a year and a half after then Fed chairman Paul Volcker raised interest rates sharply to bring down inflation, it peaked at 10.8 per cent. We haven’t seen a jobless rate as high as the current one since the nineteen-thirties.
Moreover, the 14.7 per cent figure substantially underestimates the actual jobless rate for a couple of reasons. One is a technicality. Based on the answers they give the officials carrying out the household survey, individuals get counted as employed, unemployed, or out of the workforce completely. The Employment Report explained that people who had been laid off in virus-related shutdowns should have been classified as “unemployed on temporary layoffs,” but many of them got categorized as “employed but absent from work.” If these absentees had been included in the temporary-layoff count, “the overall unemployment rate would have been almost 5 percentage points higher than reported.”
Making that adjustment takes the unemployment rate close to twenty per cent. But even that figure is already out of date, because the reference week for the household survey, which is where the jobless rate comes from, was April 12th to the 18th. Since then, at least another seven million Americans have filed for unemployment benefits. Today, the real jobless rate is probably somewhere in the low twenties, which would put it on a par with the peak rates seen during the Great Depression.
Friday’s report confirmed that layoffs and furloughs have affected virtually every part of the economy—manufacturing, government, and services—with the latter sector hit hardest. Restaurants and bars alone shed almost 5.5 million workers last month. Retailers laid off more than two million. About a million people who had been working in amusement parks, casinos, and other recreation businesses joined the ranks of the unemployed. So did a similar number of people who had been working in the offices of doctors, dentists, and other health practitioners. About eight hundred thousand people working launderettes or dry cleaners were let go. So were about eight hundred thousand hotel workers.
In many of the hardest-hit industries, employees weren’t paid very much to begin with. An analysis of the employment report from the Center on Budget and Policy Priorities estimates that “more than half of all job losses come from the low-paid group of industries.” Taken together, these low-pay industries have cut their workforces by close to thirty per cent since February, the analysis concluded. By comparison, industries in the middle third of the pay distribution have cut twelve per cent of their workforce, and industries in the top third have shed just eight per cent of their employees. These figures confirm the emergence of two distinct coronavirus economies. In the economy of well-paid professionals, most people keep their jobs and work from home. In sectors where pay is low and workers tend to have fewer educational qualifications, the shutdowns often equate to being unemployed.
Since they are low-paid to begin with, many of the newly jobless don’t have the financial resources to survive independently. Congress should extend its recent expansion of unemployment benefits until the jobless rate returns to a much lower level. Other emergency programs may also need to be extended, and more financial aid should be provided to the states. The jobs report showed that state and local governments cut their payrolls by about a million last month. If states and municipalities are forced to cut their budgets as their tax revenues fall, this figure will only increase.
How soon will the jobless rate start to fall appreciably? Friday’s report doesn’t answer this question. In recording what has already happened, it is what economists refer to as “a lagging indicator.” On Wall Street, which looks forward, investors are betting on a rapid rebound in employment, output, and profits. After the jobs report came out, the Dow Jones Industrial Average rose by nearly two per cent. Since stocks bottomed out in late March, the index has risen by more than thirty per cent. The tech-heavy Nasdaq has risen even further.
Time will tell whether this is a shrewd wager or another instance of the madness of crowds. According to Jared Bernstein, a senior fellow at the Center on Budget and Policy Priorities, who was also an economic adviser to Vice-President Joe Biden, “the closest thing to a hopeful number” in the employment report is the fact that, of the total of twenty-three million jobless Americans, eighteen million of them were classed as being on temporary layoff rather than being permanently out of work.
In all likelihood, many of these people will get called back. Over the next few months, lots of retail stores, dental practices, construction sites, fast-food joints, and suspended flights will surely reopen, preferably with proper social-distancing protocols in place. But how much revenue will businesses that reopen generate? The lesson from other countries, such as China, is that, with many people still fearful of the virus, the rebound from the shutdowns tends to be slow and partial. And in some places, such as parts of Japan, a resurgence in cases of infection has prompted a second wave of lockdowns.
If that pattern is repeated here, many temporary layoffs may turn into permanent ones. MGM Resorts International, which operates thirteen properties in Las Vegas, has furloughed sixty-three thousand workers. Earlier this week, the firm indicated that at least some of these workers are unlikely to be rehired. Given “the continued uncertainty facing our industry, we simply don’t know just how many employees will return to work within the coming months,” MGM’s acting C.E.O., Bill Hornbuckle, said. He was only referring to one industry, of course, but his statement could just as well be applied to the economy as a whole. On a day when the worst jobs report in history was released, that pervasive and ineluctable uncertainty about what the future holds is the most alarming thing.
A Guide to the Coronavirus