Jobs Report Suggests Economy May Be in Even Worse Shape Than We Thought

Going into Friday's employment report, I had downplayed its importance. The survey used to compile this data was conducted the week of March 9 and therefore doesn't reflect the rapidly evolving nature of the coronavirus crisis. The -701,000 number coming out of this report pales compared to what Initial Jobless Claims is telling us, namely that 10 million people have been laid off in the last two weeks. Still, the details of Friday's report paint a very ugly picture. Given that we know that things have only deteriorated between then and now, the economy may be in even worse shape than I assumed. Hiring seemed to freeze in almost all sectors Most industries lost jobs, although in the vast majority of cases, the losses were small. But this belies a dark reality. Hiring completely froze even before the stay-at-home orders started coming down. While I'm not shocked this is true, the pervasiveness of it is notable. Even in purely professional sectors, the ones where working from home should be a solid option, we saw mostly net job declines. They were small, but since we know layoffs were small during the survey week, it implies that almost no one was hiring. To drive the point home, the Employment Services sector lost 49,000 jobs. This is only getting worse in April. We've been correctly focusing on highly impacted sectors, such as restaurants or travel, but things were already bad across the whole spectrum as of early March. Pain only beginning in most impacted sectors The sectors with large layoffs as of early March were mostly obvious ones. Food services and drinking places was down 417,400. But that's only a little over 4% of total employment in that sector. There's another 13.9 million employees there. Accommodation was down 28,900, but there's another 2.1 million employed in that sector. Retail lost 46,200, but there's another 15.6 million still there. Some other notable declines that we might not be thinking about: Offices of dentists and Offices of physicians lost 23,800 employees off a 1.8 million base. This shows how expansively we need to think about who is getting laid off. Meanwhile, some obvious sectors hadn't begun to lay people off yet. Air transportation actually gained 1,600 employees. Obviously, based on the 10 million new claims, this report is only the tip of the iceberg, but looking through the industry data really brings it into stark relief. Job losses probably focused in lower-income workers Lastly it is notable that Average Hourly Earnings jumped. This is almost certainly because the people who lost jobs were lower wage. This shows, in part, how this is a really unfair public health crisis. It is hitting people hardest who are least able to afford the lost wages, and through no fault of their own. But that aside, when more vulnerable people lose their wages, it has greater ripple effects. People with savings can engage in consumption smoothing while they wait to find other work. However, it is likely that those who are most effected in this case don't have substantial savings. Of course, this is exactly the goal of the fiscal stimulus packages that have been passed so far, and likely more is coming. Still, we should note that this increase in Average Hourly Earnings is something of a cruel joke. It really reflects how much pain many folks will feel.

Jobs Report Suggests Economy May Be in Even Worse Shape Than We Thought

Hiring completely froze even before the stay-at-home orders started coming down.

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