Global| Apr 06 2020Massive Disruption in Labor Markets
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Summary
The March employment report shows massive disruption in the labor market triggered by the coronavirus. And as awful as the payroll job loss numbers appear they pale in comparison to the record loss in household employment and surge in [...]
The March employment report shows massive disruption in the labor market triggered by the coronavirus. And as awful as the payroll job loss numbers appear they pale in comparison to the record loss in household employment and surge in the number of people forced to work part-time.
In March, payroll employment fell 701,000, nearly 10 times greater than consensus estimates and far worse than the job loss of 27,000 in ADP employment released earlier in the week. The sharp drop in payroll employment last month was the largest monthly decline since the 800,000-job loss recorded in May 2009---near the end of the Great Financial Recession.
The employment statistics from the household survey were far worse. In March, household employment fell nearly 3 million. To put that in context, the drop in household employment in March 2020 was three times larger than any of the monthly job losses recorded during the Great Financial Recession.
Household employment is based on a survey of people, whereas payroll employment is a survey of business establishments. In other words, the household survey counts the number of people working, whereas the establishment survey counts the number of jobs (and many people hold more than one job).
At cyclical turning points, the household survey tends to flash "red" much sooner than the payroll survey. And that appears to be the case again in the current cycle.
Both surveys are conducted at the same time of each month: the payroll period that includes the 12th of the month. And what is noteworthy about the March household employment survey results is that people were losing jobs in record numbers even before the national emergency restrictions on work-life, social gatherings and travel were announced on March 13.
On top of the job loss, the household survey showed that 1.4 million workers in nonagricultural industries were forced to work part-time due to slack work or weak business conditions.
The 0.9 percentage point to 4.4% in the civilian unemployment understates the severity of the disruption in labor markets. That's because of record number 1.6 million dropped out of the workforce. In other words, if all of the people that lost jobs in March remained in the labor force the jobless rate would have been nearly one percent higher at 5.3%.
The household employment results for March are a harbinger of what will appear in the payroll data in the coming months.
Viewpoint commentaries are the opinions of the author and do not reflect the views of Haver Analytics.
Joseph G. Carson
AuthorMore in Author Profile »Joseph G. Carson, Former Director of Global Economic Research, Alliance Bernstein. Joseph G. Carson joined Alliance Bernstein in 2001. He oversaw the Economic Analysis team for Alliance Bernstein Fixed Income and has primary responsibility for the economic and interest-rate analysis of the US. Previously, Carson was chief economist of the Americas for UBS Warburg, where he was primarily responsible for forecasting the US economy and interest rates. From 1996 to 1999, he was chief US economist at Deutsche Bank. While there, Carson was named to the Institutional Investor All-Star Team for Fixed Income and ranked as one of Best Analysts and Economists by The Global Investor Fixed Income Survey. He began his professional career in 1977 as a staff economist for the chief economist’s office in the US Department of Commerce, where he was designated the department’s representative at the Council on Wage and Price Stability during President Carter’s voluntary wage and price guidelines program. In 1979, Carson joined General Motors as an analyst. He held a variety of roles at GM, including chief forecaster for North America and chief analyst in charge of production recommendations for the Truck Group. From 1981 to 1986, Carson served as vice president and senior economist for the Capital Markets Economics Group at Merrill Lynch. In 1986, he joined Chemical Bank; he later became its chief economist. From 1992 to 1996, Carson served as chief economist at Dean Witter, where he sat on the investment-policy and stock-selection committees. He received his BA and MA from Youngstown State University and did his PhD coursework at George Washington University. Honorary Doctorate Degree, Business Administration Youngstown State University 2016. Location: New York.