Friday, April 3, 2020

March jobs report: the leading edge of the catastrophe

 - by New Deal democrat

  • -701,000 jobs lost
  • U3 unemployment rate up 0.9% to 4.4%
  • U6 underemployment rate rose 1.7% to 8.7%
  • January was revised downward, while February was revised slightly upward, but the net was a decline of -57,000 jobs from previous reports.
Leading employment indicators of a slowdown or recession

I am still highlighting these because of their leading nature for the economy overall.  With one exception, these were negative to strongly negative: 
  • the average manufacturing workweek fell -0.3 hours to 40.4 hours. This is one of the 10 components of the LEI and will be a big negative.
  • Manufacturing jobs fell by -18,000. Manufacturing nevertheless gained 12,000 jobs in the past 12 months.
  • Coal: in 2016, Trump specifically campaigned on bringing back mining jobs. But they declined by -600, and an average of -200 jobs/month in the past year vs. the last seven years of Obama's presidency in which an average of -300 jobs were lost each month.
  • construction jobs fell by -29,000. In the past 12 months construction jobs still gained 162,000.
  • Residential construction jobs, which are even more leading, rose by 2200.
  • temporary jobs declined by -49,500. 
  • the number of people unemployed for 5 weeks or less rose by 1,529,000 from 2,013,000 to 3,542,000. Just last month was a new expansion low.

Wages of non-managerial workers

Here are wages in the past year:
  • Average Hourly Earnings for Production and Nonsupervisory Personnel: rose $.10 from $23.97 to $24.07, and is up +3.4% YoY. This is a deceleration from last fall.

Aggregate hours and wages:
  • the index of aggregate hours worked for non-managerial workers fell by -1.8%
  •  the index of aggregate payrolls for non-managerial workers fell by -1.4%  


This report was generated from data during the week of March 13, when layoffs due to coronavirus were just starting. As a result, not only is it likely that the April report will show a loss in excess of 1,000,000 jobs, it might show a loss in excess of -10,000,000 jobs.

All of the leading components but one were down, most of them sharply. Only residential construction remained positive as a reminder of what might have been in store for the rest of the year absent coronavirus.

The huge loss in payrolls will not be compensated for by $1200 checks. A big concern going forward will be to watch for any signs of actual wage cuts. Remember that wage deflation was the driver of the vicious 1929-32 cycle.

If there were competent Executive leadership in Washington, a one month downturn like this, with hope on the horizon, might be excused. But it is probably only a foretaste of what is in store. This an incipient economic catastrophe, and I expect that it will have an enormous impact on the November elections.