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First Cut: March payroll data first decline since September 2010, unemployment rate up to levels three years ago

In a special note, the BLS said, “We cannot precisely quantify the effects of the pandemic on the job market in March.” However, it was clear there was one and it was large. It said, “Data collection for both surveys was affected by the coronavirus” in part due to suspension of personal interviews. The household survey response was about 10 percentage points below recent months, while the establishment survey was about 9 percentage points lower.

The BLS also noted that the timing of the reference period made it possible that some impacts in the second half of March were not captured in the report.  Even if workers were not at their jobs, if they received pay during the pay period that included the 12th of the month, these were technically on the payroll.

On the household survey side, it also said there may be some inaccuracies in the unemployment rate due to how respondents answered the survey questions. If workers were laid off but expecting to be recalled, this was considered temporary and “there was an extremely large increase in the number of persons classified as unemployed on temporary layoff”. Additionally, “there was also a large increase in the number of workers who were classified as employed but absent from work.” The latter may include some who should have been included among the former.  If this is the case, the unemployment rate “would have been almost 1 percentage point higher” for March.

Making any firm conclusion about the state of the labor market from the March Employment Situation is difficult. The number almost certainly presage even deeper declines in payrolls and higher readings for unemployment in April. Payrolls haven’t seen a negative month since September 2010 and the abrupt change of pace is jarring, to say the least. The increase in the unemployment rate are equally unsettling and primed for more jumps next month. It is hard to make any inferences from the data. Anything positive in the report — like rising earnings — has to be discounted in light of more recent data elsewhere.

In March, total non-farm payrolls plunged 701,000 with a net downward revision of down 57,000 to the prior two months. Private payrolls were down 713,000 with services providers’ payrolls plummeting 659,000. Among service-providers, as might be expected, leisure and hospitality payrolls fell 459,000 as travel virtually ceased, and education and healthcare was down 61,200 due to school closures and nonessential services in health-related industries. Goods producers were shuttering activity as new orders dried up. Government payrolls were up 12,000 as it added workers for the upcoming Census, although that is likely to now be conducted via telephone and the internet more than door-to-door.

The workweek was down 0.2 hour to 34.2 in March as many workers actually just shifted to working from home. Average hourly earnings were up 0.4% in March from February and up 3.1% compared to a year-ago. Earnings are expected to decline next month but given that many service businesses are paying higher wages and bonuses to keep some workers on the job, that may not be as drastic as it might.

The unemployment rate was up to 4.4% in March after 3.5% in February as the survey saw the level of unemployed up 1.353 million to 7.140 million and the employed down 2.987 million to 155.772 million. As noted above, difficulties in taking the survey in March might have under-reported the unemployment rate. The U6 rate was up to 8.7% in March from 7.0% in February.

New entrants to the labor force were few and far between in March, up a scant 4,000 to 509,000. People leaving jobs voluntarily declined 50,000 to 727,000. Job losers rose 1.223 million to 3.946 million. Interestingly, people at work part-time for economic reasons was up 1.447 million to 5.765 million. This may reflect reduced hours for some previously full-time workers.

 

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