Friday, June 11, 2021

Employment, Unemployment, the Economy, and the Pandemic: Where We Are Now and Where We Are Headed, Beyond the Numbers

Per last week’s post, the May jobless numbers were favorable, but mainly because our Covid-19 progress was so good.  How are we doing otherwise, and where might we be going?

Before the month started, the National Bureau of Economic Research released a working paper, “The Donut Effect of Covid-19 on Cities,” by Arjun Ramani and Nicholas Bloom.  It’s 12 printed pages and academic, but comes down to two ideas.  First, many people are leaving the centers of large cities but not small ones, but, second, they are staying in the same metropolitan areas.

Moving on to June 1st, we learned “How the World Ran Out of Everything,” from Peter S. Goodman and Niraj Chokshi in The New York Times.  The authors accurately blame “Just In Time” inventory management, in which suppliers must provide parts or raw materials quickly when their customers need them.  That achieves its purpose of cutting carrying costs when everything moves smoothly, but in times such as the past year-plus, with a widespread set of pandemic-related problems as well as a ship blocking the Suez Canal, it has not.  From a customer’s standpoint I have long been grouchy about that system, as some places practiced it so aggressively that I might find what I wanted unavailable simply because another customer had just been there.  Two lessons for all participating in Just In Time:  Things do not always work smoothly, and business you lose from not having product may disappear forever.

Could it be that “U.S. labor market worse than it appears, Fed paper suggests” (Reuters, June 1st)?  Yes, this article’s indication that statistics “suggesting labor market slack should be given more weight than those pointing to tightness,” seems right, as latent demand, as shown by the AJSN, is still pushing 20 million new positions, and we have the real possibility that applicants will return quicker than their opportunities.  On the other side, “Americans Don’t Want to Return to Lousy Low Wage Jobs,” as put by Daniel Alpert in The New York Times also on June 1st.  That is the case now, but over the next few months the issues of Covid-19 safety, extra-high unemployment benefits (with “all extra federal supplements” over by September 6th), and child-care availability will be resolved, and the bulk of laborers will have no choice, even if wages return to their 2019 levels.  It could well happen, also, that we get “a contraction in household incomes this autumn.”

In the meantime, “Companies struggling to hire workers, coping with rising prices, Fed says” (Megan Henney, Fox Business, June 2nd).  That is also a temporary situation, and what is happening by about August should tell the true ongoing story.  There were some good scattered remarks in the June 4th Lauren Bauer et al. Brookings Up Front blog post “Examining the uneven and hard-to-predict labor market recovery,” such as April’s 266,000 jobs gain hiding 6.6 million going “from being employed to unemployed or out of the labor force,” applications filed by startups “likely to employ people” rising from 2019’s 110,000 average to 150,000 even since July, and that some employees may be taking time off “after a very difficult year,” but we know we are recovering, with only the pace unknown.

In the June 4th Times, Giovanni Russonello told us “Was the Jobs Report Good?  It’s in the Eye of the Beholder.”  It was an interview with frequent business reporter Ben Casselman, who said that “the report was exactly good enough to allow everyone to hold on to their existing beliefs, and for us all to get to do it again a month from now,” and “that things are getting better… just not as quickly as anyone would like.”  Casselman pointed out that between the mid-May data collection time and the article date, 12 million Americans have been fully vaccinated, and noted that inflation should not be a large concern since it was “tame” even with pre-pandemic 3.5% joblessness.  Then, in the same publication on the same date, we had former chief Department of Labor economist Betsey Stevenson’s “The Jobs Report Takeaway:  A Huge Reallocation of People and Work Is Underway.”  Her observations include “the unemployed aren’t leaving work, they are changing work, and change takes time” with “a giant mixer” between those looking and those hiring, and, like it or not, it will be a while to achieve movement of “workers into the jobs in which they can be most productive.”  We don’t know the extent or permanence of these coronavirus-caused shifts, but we know there will be some.

On June 6th, also in the New York Times, Heidi Shierholz worked to get us together with “Republicans, Don’t Ignore the Evidence on ‘Labor Shortages.’”  She wrote that “the main problem in the U.S. labor market remains one of labor demand, not of labor supply,” that we are still 7.6 million positions down from February 2020, and that higher pay is a sign of “a healthy labor market.”  All true, but we don’t yet know ongoing significances.  Then, in the June 8th Times, we had advice from Glenn Hubbard on “How to Keep the Economy Booming – And Meet the Demand for Workers,” including that “policy should support returning to work and matching workers to jobs by supporting re-employment and training for new skills, not just boosting demand.”  Indeed, it is clear to me that, now, all unemployment benefit recipients should be required, as pre-pandemic, to apply for jobs. 

Just how strong will the economy be late this summer?  The title of Neil Irwin’s “Hot Vax Summer Is Looking Lukewarm,” in the June 4th New York Times, came out more pessimistic than the author may have intended – “lukewarm” is quite a bit cooler than “warm” – but by now it seems likely that we will not be completely back that soon.  With the share of Americans becoming fully vaccinated creeping along, to only 43% having that status as of yesterday, we are not going to have an easy “reopening spurred on by vaccination.”  As well, “at the job creation rate of the last three months, it would take 14 months to return to February 2020 employment levels.”  So let’s expect our July and August prosperity to be warm, like the weather, but hardly a heat wave.  And that is where we stand.

Friday, June 4, 2021

May: In Strong Employment Month, Latent Demand Increased with AJSN Showing We Could Fill 19.9 Million More Jobs

With last month’s issue causing concern about the intensity of the expected recovery, this morning’s Bureau of Labor Statistics Employment Situation Summary was a particularly important one.  Last time was superficially disappointing, but once we got under the surface, especially in conjunction with our pandemic results, it was generally good. 

This time, though, was better even at first glance.  Although the number of net new nonfarm payroll positions, at 559,000, did not reach the consensus 650,000 to 675,000 prediction, it was still a healthy gain.  Seasonally adjusted unemployment fell from 6.1% to 5.8%, with the unadjusted version off from 5.7% to 5.5%.  The count of those jobless dropped 500,000 to 9.3 million, with those on temporary layoff down 300,000 to 1.8 million and people out for 27 weeks or longer decreasing 400,000 to 3.8 million.  The two measures of how many Americans are either working or one step away, the labor force participation rate and the employment-population ratio, were mixed, with the former down 0.1% to 61.6% and the latter up the same amount to 58.0%.  The total of people working part-time for economic reasons, or holding on to part-time work while thus far unsuccessfully seeking full-time propositions, gained 100,000 to 5.3 million.  Average hourly private nonfarm payroll earnings increased substantially again, this time 16 cents higher to reach $30.33 – that continues to reflect higher wages as well as lower paying positions still unrestored.

The American Job Shortage Number or AJSN, the measure showing how many new positions could be quickly filled if all knew they were easy and routine to get, increased 169,000, to reach the following:

    

The largest differences from April were the effect of those unemployed, reducing the AJSN by 351,000, along with people not looking for a year or more, adding 278,000 to the metric, and a jump in those non-civilian, institutionalized, or off the grid, which was in effect a correction since newly implemented census results showed about two million more Americans than previously projected, which added 201,000.  If the overall population were the same for both months, the AJSN would have been almost unchanged.  The AJSN’s share from official joblessness for May was 39.9%, down from April’s 42.0%.  The statistic may now be somewhat overstated, due to those getting unemployment compensation not being required to search for work, but that was nothing new in May, has already changed in some states, and will follow in more.   

The overall results here were only slightly positive, so how did we do at the same time with the coronavirus?  Per the New York Times, the 7-day average of new daily cases fell 53% from April 16th to May 16th, reaching 33,040.  The same average of deaths was off 18% to 611, and the number of people hospitalized, calculated the same way from the same dates, lost 25% and is now at 33,693.  The number of daily vaccinations, though, decreased 44% to 1,886,917, reflecting, with 41% of Americans now fully vaccinated, quickly dropping demand. 

It is simple, then to evaluate how we did with employment this time.  We did fine.  We can see that the increase in people going back to work, though not massive, did not interfere with national pandemic recovery.  While this month was not flawless, the turtle took another solid step forward.