How to Read Friday’s U.S. Jobs Data and Beyond for Virus Impact
America’s once-robust labor market is collapsing faster than at any point in the last century
(Bloomberg) -- America’s once-robust labor market is collapsing faster than at any point in the last century. The details are about to start showing in the monthly jobs report.
Nearly 10 million jobless claims have been filed in the past two weeks as government-mandated shutdowns to contain the coronavirus force companies large and small, and industries from restaurants to manufacturers, to close their doors.
Payrolls are forecast to decline in March for the first time since 2010 as the early impacts of the pandemic began moving through the economy. But the reference week for Friday’s data ended just before business closures, along with employee layoffs and furloughs, became more widespread.
That means reports in the coming months will provide a more comprehensive and detailed picture of how the virus-containment measures are crippling the nation’s jobs engine.
“This survey is not going to capture the extreme job loss that has clearly occurred in the last few weeks,” said James Sweeney, chief economist at Credit Suisse Group AG. “The horror show” will come in the April employment report, which is scheduled for May 8.
Here’s a guide to how to read the jobs reports both Friday and in coming months:
Payrolls
- Change in nonfarm payrolls, median forecast: Minus 100,000
Besides the timing of the survey, there are several reasons to take the March payroll figures with a grain of salt.
First, the extent to which companies are completely going out of business can play havoc with the payrolls count. The Bureau of Labor Statistics adjusts job numbers by accounting for business “births” and “deaths” -- but uses a statistical model to do so, given determining how many new businesses open and shut down in real time is extremely challenging, if not impossible.
The problem is exacerbated now, since firm “births” typically drop sharply in bad times, leading to potential challenges in accurately presenting the data.
The model “works very well during normal expansion times, which is most of the time,” said Erica Groshen, who was BLS commissioner from 2013 to 2017. “It doesn’t work as well during turning points.”
A BLS spokesperson said in an emailed statement that the agency “will be reviewing our birth-death model and all other aspects of our methodology very carefully.”
In addition to that issue, the figures on payrolls -- as well as wages and hours -- may be less reliable than usual because stretched or shuttered businesses might skip responding to the monthly survey. Typically the numbers are based on voluntary responses from about 145,000 businesses and government agencies.
One other quirk to watch: Census workers are poised to add about 17,000 to the March payrolls figure, according to the bureau’s tally of temporary hiring for the decennial count. But looking ahead, even the anticipated surge in census hiring in the coming months is unlikely to offset the millions of Americans out of work.
Unemployment
- Unemployment rate, median forecast: 3.8%, highest in a year, up from 3.5%
Over the coming months the jobless rate is expected to surge, with some estimates expecting it to rise into the mid-teens -- above the financial-crisis era’s 10% peak. However, the U-3 rate, as it’s formally known, may fail to capture the full extent of unemployment, because it only includes people actively looking for a job.
That means other measures, including the participation rate and employment-population ratio, should also be looked at to gauge the decline in employment.
What Bloomberg’s Economists Say
“Due to measurement technicalities around how payrolls are counted, the results should not be too shocking. But payback will come in April, when the data are poised to show record-breaking weakness.”
-- Carl Riccadonna, Yelena Shulyatyeva and Andrew Husby
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Discouraged workers -- the Labor Department’s term for those who believe no jobs are available -- aren’t counted as unemployed. They are, though, captured in the U-6, or the underemployment rate, which includes part-time workers who would prefer a full-time job and those who aren’t looking.
“This could be a case where you see more divergence between U-6 and U-3 than you have before if you get a lot of people who fall into the discouraged-worker category or who have had their hours cut,” Groshen said.
Wages
- Average hourly earnings, median estimates: 0.2% monthly gain, 3% rise from year ago
Since the jobs report’s wage data only capture people still working, the numbers are unlikely to show a negative impact as deep as on payrolls and unemployment.
In addition, with this downturn hitting low-wage employees harder -- such as those in restaurants and hotels -- the data might give misleading signals. Only an estimated 8.8% of so-called leisure and hospitality workers can work from home, whereas more than half of the workers in high-wage industries like information and financial activities can.
“That actually acts to boost average hourly earnings even if underlying wage growth really isn’t that strong,” said Robert Rosener, senior U.S. economist at Morgan Stanley. “So there will be some noise in the wage data that we have to be very careful about interpreting over the next few months.”
Even so, some specific industries may see stronger wage growth. Amazon.com Inc. announced in March that it would be boosting pay and hiring an additional 100,000 workers to keep pace with a surge in delivery orders.
It’s also possible wage gains could slow as companies cut costs in whatever way they can amid a drop-off in demand, said Brett Ryan, senior U.S. economist at Deutsche Bank AG.
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