While economic fundamentals ceased to matter about a month ago when the Fed went nuclear and not only injected trillions in the bond and repo market, but also directly backstopped the corporate bond market (with many expecting it will do the same in equities), there is something utterly surreal and terrifying watching stocks surge just as the US reports its worst jobs report in history, which it did moments ago when the BLS reported that in April, the US lost a record 20.5 million jobs, (not quite as bad as the 22 million expected but at this level what does it matter) the biggest drop in history, and 10x more than the 2 million jobs lost at the peak of the Great Depression.
The change in total nonfarm payroll employment for February was revised down by 45,000 from +275,000 to +230,000, and
the change for March was revised down by 169,000 from -701,000 to -870,000. With these revisions, employment changes
in February and March combined were 214,000 lower than previously reported, but in the context of the 20.5mm print this is completely irrelevant.
Similarly, the unemployment rate, which just a few short months ago was at a 50-year low of 3.5%, exploded to the highest on record, surging by 10.3% to 14.7% (modestly below the 16.0% expected). This is the highest rate and the largest over-the-month increase in the history of the series (seasonally adjusted data are available back to January 1948). The number of unemployed persons rose by 15.9 million to 23.1 million in April, reflecting the effects of the coronavirus pandemic.
And the broader under-employment rate also soared.
The BLS was quick to point out the impact of the coronavirus on the jobs report:
Due to the impact of the COVID-19 pandemic, the relationship between the two was no longer stable in April. Therefore, the establishment survey made modifications to the birth-death model.
If the workers who were recorded as employed but absent from work due to “other reasons” (over and above the number absent for other reasons in a typical April) had been classified as unemployed on temporary layoff, the overall unemployment rate would have been almost 5 percentage points higher than reported (on a not seasonally adjusted basis).
In other words, the real unemployment rate was about 20%!
In any case, breaking the "goalseeked" number down, the Hispanic unemployment rate surged the most, and is now higher than that for blacks.
The number of unemployed persons who reported being on temporary layoff increased about ten-fold to 18.1 million in
April. We note that this is 'self-reported' - i.e. these 18 million Americans believe they will get their job back within six months. The number of permanent job losers increased by 544,000 to 2.0 million.
Alongside the surge in the unemployment rate, the labor force participation rate plunged by over 3% to 60.2%, the lowest since the early 1970s.
While all of these numbers, horrific as they may be, were generally as expected, there was an clear "WTF" moment when the BLS reported that the average hourly earnings in March soared by 7.9% Y/Y, smashing expectations of a 3.3% increase. The reason for this surge is that hours worked plunged by 15%, while pay collapsed "only" 8%, which while still a record hit to the consumption power of the U.S. who makes up 70% of US GDP, meant that average hourly wages - which are merely a function of hours worked and total pay - actually rose! And despite failing to predict it in advance, economists were quick to "goalseek" that the number was inflated by disproportionate job losses among the lower-wage workers.
Some more details from the historically bad jobs report:
In April, unemployment rates rose sharply among all major worker groups. The rate was 13.0 percent for adult men, 15.5 percent for adult women, 31.9 percent for teenagers, 14.2 percent for Whites, 16.7 percent for Blacks, 14.5 percent for Asians, and 18.9 percent for Hispanics. The rates for all of these groups, with the exception of Blacks, represent record highs for their respective series.
In April, the number of unemployed persons who were jobless less than 5 weeks increased by 10.7 million to 14.3 million, accounting for almost two-thirds of the unemployed. The number of unemployed persons who were jobless 5 to 14 weeks rose by 5.2 million to 7.0 million. The number of long-term unemployed (those jobless for 27 weeks or more), at 939,000, declined by 225,000 over the month and represented 4.1 percent of the unemployed.
The labor force participation rate decreased by 2.5 percentage points over the month to 60.2 percent, the lowest rate since January 1973 (when it was 60.0 percent). Total employment, as measured by the household survey, fell by 22.4 million to 133.4 million. The employment-population ratio, at 51.3 percent, dropped by 8.7 percentage points over the month. This is the lowest rate and largest over-the-month decline in the history of the series (seasonally adjusted data are available back to January 1948).
The number of persons who usually work full time declined by 15.0 million over the month, and the number who usually work part time declined by 7.4 million. Part-time workers accounted for one-third of the over-the-month employment decline.
The number of persons at work part time for economic reasons nearly doubled over the month to 10.9 million. These individuals, who would have preferred full-time employment, were working part time because their hours had been reduced or they were unable to find full-time jobs. This group includes persons who usually work full time and persons who usually work part time.
The number of persons not in the labor force who currently want a job, at 9.9 million, nearly doubled in April. These individuals were not counted as unemployed because they were not actively looking for work during the last 4 weeks or were unavailable to take a job.
Looking at the composition of job losses, here is who was hit the hardest:
- Leisure and hospitality payrolls: -7,653,000
- Retail trade: -2,106,900
- Professional and business services: -2,128,000
- Health care and social assistance: -2,086,900
- Manufacturing: -1,330,000
- Construction: -975,000
- Information: -254,000
- Financial activities: -262,000
- Transportation and warehousing: -584,100
And some more details here:
- In April, employment in leisure and hospitality plummeted by 7.7 million, or 47 percent. Almost three-quarters of the decrease occurred in food services and drinking places (-5.5 million). Employment also fell in the arts, entertainment, and recreation industry (-1.3 million) and in the accommodation industry (-839,000).
- Employment declined by 2.5 million in education and health services in April. In health care, employment declined by 1.4 million, led by losses in offices of dentists (-503,000), offices of physicians (-243,000), and offices of other health care practitioners (-205,000). Employment also declined in social assistance (-651,000), reflecting job losses in child day care services (-336,000) and individual and family services (-241,000). Employment in private education declined by 457,000 over the month.
- Professional and business services shed 2.1 million jobs in April. Sharp losses occurred in temporary help services (-842,000) and in services to buildings and dwellings (-259,000).
- Employment in retail trade declined by 2.1 million. Job losses occurred in clothing and clothing accessories stores (-740,000), motor vehicle and parts dealers (-345,000), miscellaneous store retailers (-264,000), and furniture and home furnishings stores (-209,000). By contrast, the component of general merchandise stores that includes warehouse clubs and supercenters gained 93,000 jobs.
- Manufacturing employment dropped by 1.3 million. About two-thirds of the decline was in durable goods manufacturing (-914,000), which saw losses in motor vehicles and parts (-382,000) and in fabricated metal products (-109,000). Nondurable goods manufacturing shed 416,000 jobs.
- Employment in the other services industry declined by 1.3 million in April, with nearly two-thirds of the decline occurring in personal and laundry services (-797,000).
- Government employment dropped by 980,000 in April. Employment in local government was down by 801,000, in part reflecting school closures. Employment also declined in state government education (-176,000).
- Construction employment fell by 975,000 in April, with much of the loss in specialty trade contractors (-691,000). Job losses also occurred in construction of buildings (-206,000).
- Employment fell in transportation and warehousing in April (-584,000). Transit and ground passenger transportation and air transportation lost 185,000 jobs and 141,000 jobs, respectively.
- Wholesale trade shed 363,000 jobs in April, largely reflecting losses in the durable and nondurable goods components.
- Employment in financial activities fell by 262,000 over the month, with the vast majority of the decline occurring in real estate and rental and leasing (-222,000).
- Employment in information fell by 254,000 in April, driven by a decline in motion picture and sound recording industries (-217,000).
- Mining lost 46,000 jobs in April, with most of the decline occurring in support activities for mining (-33,000).
And the most surreal part: S&P futures jumped on the worst jobs report of all time!