Well, the US Labor Department reported better unemployment figures today than was expected.
Many people were thinking that the unemployment rate might come in above 20.0 percent.
After all, the reports on new claims of unemployment had been going up and the total reached this week amounted to around 43.0 million people.
But, the Labor Department reported that for May the unemployment rate was 13.3 percent, down from 24.7 percent in April.
There were 2.5 million jobs added in May, again surprisingly high.
Radical Uncertainty
Let me just say that these numbers will be revised. What was released was just a first estimate.
And, with all that is going on in the economy…known and unknown…I believe our statistics will be somewhat of a guesstimate for a relatively extended period of time.
The structure of the economy is changing so that how we define things and how we measure things will need to change as we go along, but while we are “going along,” we are going to have to accept and build our thinking around the information that we do receive. We are going to need to see a lot of data and build our narratives and then try and confirm them as we go along,
In some cases, we may not really fully know things until some time after they are reported.
One example came up this morning indicating that some of the data reported may need to be revised.
James Politi and Eric Platt report in the Financial Times that
Some of the details of the jobs report were less encouraging than the top-line figures. The labor department noted a classification error whereby some people had been incorrectly reported as employed but absent from work, instead of temporarily laid off.”
Otherwise, the unemployment rate would have been about 3 percentage points higher, on a non-seasonally adjusted basis.”
So…maybe…the unemployment rate for May should be above 16.0 percent, indicating that unemployment had risen for the month from the April figure of 14.7 percent.
Closet than an estimate in the 20s, but still lower than expected.
Hiring Pickup Sooner Than Expected
The primary reason given for the lower than expected unemployment rate is that rehiring came about earlier than expected and in greater numbers than expected.
Some of this earlier than expected hiring came about because some states, some cities, some areas, began to open up their businesses earlier than many experts had believe would be the case.
The general industries where this took place the Labor Department indicated were leisure and hospitality, construction, education, healthcare, and retail. The area where hiring was worse than expected was in government where budgets are being severely challenged these days.
The fact is that there still remain 21.2 percent of the work force that are unemployed or underemployed (including part-time workers and those who gave up looking for jobs).
Furthermore, there is the change in the Labor Force Participation rate. This measure actually rose by 0.6 percent in May, but now stands at 60.8 percent of the work force, which is substantially below the 63.2 percent average for the first three months of this year. A substantial number of people have dropped out of the labor force because of current conditions.
What we have to judge is what all these figures mean in terms of how the economy is “bouncing back” from the earlier shut-down.’’
The stock market jumped right on these numbers and by noon on Friday the Dow Jones Industrial Average was up by around 1,000 points and the S&P 500 Stock Index was up by around 90 points.
The employment numbers released have certainly created a positive response in the investment community.
I will have to see more information to think that the recovery might come to be a V-shaped trajectory. I still believe that the upswing will be slower and of longer duration. But, we have to receive and absorb the data as they become currently released.
Other Concerns
We still can’t avoid other bits of information. For example, I am still concerned about the debt overload in various industries.
Today, we hear about what is happening in the energy area and the possibility for rising defaults and bankruptcies. For example, Chesapeake Industries appears to be on the brink of bankruptcy. It’s debt load, the decline in the price of oil, and the economic slowdown resulting from the spread of the coronavirus pandemic seem to have caught up with the firm and its demise is only weeks or months away.
The thing is that analysts believe that if Chesapeake goes, others will follow soon after. Chesapeake represents all that is hanging over the gas and oil space these days.
And, unfortunately, this is not the only industry facing such a future. We already have seen the debt problems hitting such firms as Hertz and retail organizations like J. C. Penney. The list goes on.
Too Soon To Know
There is still so much uncertainty surrounding the current situation and so much uncertainty surrounding the political environment that it is hard to pull every thing together. Still, I believe that the economic recovery will be a slow, agonizing one, and one in which we have not yet seen all the problems.
The two big uncertainties discussed in this post still have a lot of unknowns. First, we don’t really have a grasp on how many workers will not be rehired, a number that could be quite substantial. Second, we have not seen all the financial fallout yet, and this could be quite severe.
All we can do is accept the statistics we are given and build the best story we can about events.
