Breakingviews - Meaning of U.S. jobs market data mutates

Reuters

Reuters


NEW YORK (Reuters Breakingviews) - In February, just 5.8 million Americans were unemployed, out of a labor force of over 164 million. Last week alone, 6.6 million people filed initial claims for unemployment benefits. Usually, the regular U.S. jobs reports provide insight into gradual economic trends. Now they merely document the sudden impact of the Covid-19 pandemic. Friday’s monthly report – usually a key data point – is already out of date.

Last week’s claims, which are adjusted for seasonal factors, came on top of 3.3 million reported by the Department of Labor the week before. As large parts of the economy shut down, it’s presumably reasonable to add the two together, suggesting 10 million jobs lost – so far – in a matter of days. Adjusting the February monthly data, that would push the unemployment rate towards 10%, from the historically low 3.5% or so in recent months.

It seems bizarre that economists polled by Reuters are forecasting that the employment report for March will show just 100,000 fewer positions than in February and a jobless rate still under 4%. Sure, that would be a big swing from 273,000 jobs added a month earlier. But even if the losses come in at, say, double the forecast, they will fall wildly short of reality.

That’s because the surveys behind the monthly data were conducted in the second week of March, before the governors of California and New York – to name just two – officially ordered businesses closed and people to stay at home. April’s figures, due in early May, will capture more of the economic downdraft.

The meaning of these reports has mutated. Rather than being lost for the duration of the economic cycle, or longer, many jobs should return when factories and restaurants can reopen. The U.S. way, for the most part, is to hire and fire at will – and to temporarily lay people off, or furlough them in the jargon, just as the federal government does during budget crunches. That triggers unemployment benefits, which were increased in the stimulus bill passed last week by Congress – one small plus in all the doom and gloom.

The hope is that, once coronavirus restrictions are eased, the speed of the rebound will be as unprecedented as the downturn. Even then, though, large swings may have lost some of their power to shock.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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