Has unemployment been misstated? Yes — read on if you want more detail …
In our report of the April 2020 employment situation, we questioned, “Are workers accurately reporting their job prospects or is it wishful thinking that they will be recalled from layoffs? Also, are employers are not being frank by dangling the prospect that furloughed workers will be the first to be rehired when, in fact, employers will use this as a way to eliminate workers whose productivity does not meet the possibly new and reduced level of activity?”
One month later in a 15-page FAQ released simultaneously with the May jobs report in June 5, the Bureau of Labor Statistics, admitted that many workers were misclassified as “employed but not at work” when in reality they “… should have been classified as unemployed on temporary layoff.” We won’t get deep into the weeds why the misclassification error occurred, but we are quite sure there was no political pressure — actually the only political appointment at BLS is the commissioner and he has no influence on the final published numbers, which is a highly automated process overseen by career BLS economists.
With that said, BLS’s FAQ elaborated” “Of the 8,400,000 employed people not at work during the survey reference week in May 2020, 5,400,000 people were included in the ‘other reasons’.” This was much, much higher than the 549,000 average for May 2016-2019. “BLS analysis of the underlying data suggests that this group included workers affected by the pandemic response who should have been classified as ‘unemployed on temporary layoff’.”
Outside economists estimate that this error means that the actual April unemployment rate should have been closer to almost 20 percent instead of 14.7 percent that was officially reported. And the May unemployment rate should be around 16.1 percent instead of 13.3 percent that was officially reported.
A little side note from “the weeds”: answers from the survey are accepted as recorded and “no ad hoc actions are taken to reassign survey responses.” BLS further explains “Such a misclassification … can occur when respondents misunderstand questions or interviewers record answers incorrectly.” Obviously, BLS and the Census Bureau — Census actually administers the survey instrument for BLS, but we digress — acknowledged the problems the pandemic has had on the data and are conducting additional training and adding more instructions into the survey instrument.
In blog post on June 29, which was essentially a restatement of the June 5 FAQs, the BLS commissioner admitted, “Although we noticed some improvement for May, the misclassification persisted.”
Temporary Layoffs compared to permanent job losers …
Now that we have either made the unemployment situation clearer or completely confused you at this point, let’s look at those who think they are on temporary layoff and those who know that they have permanently lost their job.
Specifically, 4,778,000 fewer considered themselves on temporary layoffs in June from the previous month, probably because they got called back to work. But, 1,604,000 more consider themselves having permanently lost their job in June than in February, which was the month before furloughs began due to the pandemic.
As we’ve mentioned before, there is likely a large number of those who think they are on a temporary layoff but, in reality, have little chance of being called back because there will be no job or company to go back to.
June 2020 Employment Report
We think it is very important to point out that the data for the June 2020 employment situation was collected for a period prior to many states either halting or walking back their reopening plans due to the resurgence of COVID-19. In other words, we believe that the June 2020 numbers are not truly reflective of the current employment situation. With that said, let’s muddle through.
The unemployment rate declined as the number of unemployed persons decreased as other measurements of employment improved as discussed in the Household Survey section below. However, the number of people filing for unemployment benefits last week continued at a very high level — for a chart see our Twitter feed.
After the number of jobs fell off the cliff in April with a decline of 20,787,000, the economy added 2,699,000 nonfarm jobs in May and another 4,800,000 in June. However, we surmise that at least some of June’s job growth was quickly given back as states delayed or walked back their reopening plans after the survey reference week for the June employment and jobs data.
Average hourly wages were down by 35 cents an hour, likely due to large uptick for lower-paying service jobs coming back in June, albeit we believe only temporarily.
And Temporary help services experienced the greatest month-over-month increase in more than 30 years, However, this is conflict with anecdotal comments received from our staffing industry contacts and readers.
The Bureau of Labor Statistics reports that the economy added 4,767,000 private-sector jobs in June after increasing by 3,232,000 in May and declining by 19,835.000 in April.
The private Goods-producing sector was up 504,000 in June after adding 684,000 in May and declining by 2,388,000 in April.
Manufacturing was up 356,000 in June after adding 684,000 in May.
The Construction sector slowed to growth of “only” 154,000 in June after increasing by 453,000 in May.
But Mining and logging continued to dig dug itself farther down into a hole with a loss of 10,000 in June following a decline of 19,000 in May.
The private Service-providing sector added 4,263,000 jobs in June on top of the 2,548,000 it added in May after taking a tremendous hit in April when it shed 17,447,000 jobs.
The Retail trade sector welcomed 739,800 jobs back in June to greet the 371,500 it brought back in May.
The Wholesale trade sector increased 67,600 in June after adding 12,300 in May.
Transportation and warehousing, which declined by 28,300 in May, shifted back into forward with an increase of 98,700 in June.
Financial activities remained on the plus side with the addition of 32,000 jobs in June after adding 10,000 in May.
The Professional and business services sector increased by 306,000 in June that followed an increase of 160,000 in May and this was certainly a welcome return for some of the 2,202,000 jobs lost in April. However, declines at Computer systems design and related services continue with a loss of 20,400 jobs in June on top of the 7,100 decline in May. But, Management and technical consulting services added 9,400 in June after adding 8,700 in May. And Architectural and engineering services also gained in June with an increase of 12,400 jobs in June after increasing by 4,000 in May.
The Education and health services sector was up 568,000 in June after adding 399,000 in May, which followed a decline of 2,603,000 in April. Home health care services continued to recover with a relatively tremendous gain of 17,800 in June after adding (revised from a decline) 3,400 in May.
As expected, the Leisure and hospitality sector jumped with a gain of 2,088,000 in June after adding 1,403,000 in May, but still has a long was to go before recouping the 7,575,000 jobs it cancelled in April.
The total number of Government jobs was up a total of 33,000 in June. The federal government was up 1,000, state government was down 25,000, and local government was up almost 57,000 with the 70,300 increase in local education more than compensating for the loss of 13,800 jobs outside of local education.
Temporary Help Services Roundup
As mentioned earlier, Temporary Help Services again surprised with an increase of 148,900 in June on top of an upwardly revised increase of 46,900 in May. But this clearly does not make up for the 840,500 decline decline THS experience in April. The Jun 2020 THS data calculates to 7.1 percent sequential growth, which was not quite double the percentage increase in all nonfarm jobs of 3.6 percent. However, the year-over-year decline of 23.8 percent for temporary help services was considerably steeper than the 8.6 percent decline in total nonfarm jobs for the same period.
For a chart of temporary help’s growth from January 1991 to Jun 2020 and comparing its trend to total employment, click here.
(if charts are unclear, click on it to open in a browser window)
In June 2020, temporary help services market share, which is its portion of all jobs, was considerably up at 1.6282 percent from May’s 1.5750 percent. However, a year ago in June 2019 it was 1.9519 and two years ago in June 2018 it was 2.0061 percent.
Although BLS continues to admit that household members are misclassifying themselves in regard to if they are employed or unemployed, the official unemployment rate was 11.1 percent in June, supposedly down from 13.3 percent in May and a high of 14.7 percent in April.
The number of employed persons increased 4,940,000 om June as the number of unemployed persons declined 3,235,000/ The size of the entire labor force expanded 1,705,000 in June. And there were 1,547,000 fewer people considered as not in the labor force in June.
The labor force participation rate improved 0.7 to 61.5 percent in June from May and the employment-to-population ratio was up 1.8 to 54.6 percent; in “normal” times these data rarely change more than 0.1 on a month-over-month basis.
The number of discouraged workers increased considerably from a year ago to 684,000 in June 2020 from 425,000 in June 2019.