Job Losses Roar On

The ADP Employment Report showed that there were 27,000 job losses in the month of March. Believe it or not, this was stronger than expectations, which were calling for 125,000 to 170,000 job losses. Unfortunately, this number will only get worse, as the figures were derived on the 12th of March or earlier, so the number does not fully take into account the effect of the pandemic.

Small businesses accounted for all of the reductions, slicing 90,000 from payrolls, with 66,000 of those reductions coming from companies that employ 25 people or less. Medium-sized businesses (with between 50 and 499 employees) added 7,000 jobs while big companies hired 56,000. Again, this has changed since March 12, and April’s report will more fully reflect this.

The Bureau of Labor Statistics (BLS) reported that there were 701,000 job losses in the month of March, which was much worse than expectations of approximately 150,000 losses. Let’s unpack what this means.

There are two reports within the Jobs Report: the Business Survey where the headline job number comes from and the Household Survey where the Unemployment Rate comes from. The Household Survey also has a job loss component.

There is a fundamental difference between these two surveys. The Business Survey is based predominately on modeling, while the Household Survey is done by actual phone calls to homes, meaning it may be reflective of actual job losses.

Why is this significant? While the headline number from the Business Survey showed 701,000 losses, that figure is likely very understated. Remember that there have been 10 million individuals who filed for unemployment benefits over the past 2 weeks – so the losses have to accelerate. Meanwhile, the Household Survey showed that there were almost 3 million job losses.

The Household Survey also reported that the Unemployment Rate increased from 3.5% to 4.4% but keep in mind that over 1.6 million people left the labor force. The Unemployment Rate would have been much higher if we didn’t have so many people leave the labor force.

The all in U6 Unemployment Rate, which includes total unemployed, plus all persons marginally attached to the labor force, plus total employed part-time for economic reasons, increased from 7% to 8.7%.

Rounding out the report, average hourly earnings increased from 3.0% to 3.1% on an annual basis, probably because lower-paid workers were cut first. Hours worked, however, fell by 0.2 hours. The more important weekly earnings figure, which takes this into account, was down from 3% to 2.2%.

The labor sector is certainly feeling the brunt of the pandemic, and upcoming reports will likely show this even more, once the data fully reflects the virus in full swing.

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