April 2020 Employment Report

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The Bureau of Labor Statistics’ (BLS) establishment survey showed non-farm payroll employment crashed by a worst-ever 20.5 million jobs in April (-21.25 million expected). That was in addition to February and March employment changes that were revised down by a combined 214,000 (February: -45,000; March: -169,000). Meanwhile, the unemployment rate (based upon the BLS’s household survey) leapt (+10.3PP, the largest MoM rate increase on record) to 14.7% under a combination of a shrinking labor force (-6.432 million) and a plummeting number of employed persons (-22.369 million). 

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Observations from the employment reports include:

* Goods-producing industries lost 2.355 million jobs, while service-providing employment (-18.145 million jobs) again bore the brunt of the drop -- especially leisure and hospitality (-7.653 million), health care and social assistance (-2.087 million), administrative and support services (-1.523 million), and retail trade (-2.107 million). Manufacturing contracted by 1.330 million jobs. That result is consistent the Institute for Supply Management’s (ISM) manufacturing employment sub-index, which fell into deep contraction in April. Wood Products employment retreated by 27,900 (ISM decreased); Paper and Paper Products: -8,200 (ISM unchanged); Construction: -975,000 (ISM decreased). 

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* The number of employment-age persons not in the labor force (NILF) jumped (+6.57 million) to 103.4 million. As a result, the employment-population ratio (EPR) dropped to 51.3%; roughly, barely half of the people being added to the working-age population are finding work. 

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* Because the civilian labor force shrank by 6.4 million in March, the labor force participation rate fell (-2.5PP) to 60.2%. Average hourly earnings of all private employees rose by $1.34 to $30.01, resulting in a 7.9% year-over-year increase. For all production and nonsupervisory employees (pictured above), hourly wages rose by $1.04, to $25.12 (+7.7% YoY). Since the average workweek for all employees on private nonfarm payrolls expanded (+0.1 hour) to 34.2 hours, average weekly earnings increased by $48.69, to $1,026.34 (+7.3% YoY). With the consumer price index running at an annual rate of 1.5% in March, those wage earners who remain are gaining purchasing power according to official metrics. 

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* Full-time jobs tumbled (-15.0 million), to 114.3 million. Workers employed part time for economic reasons (shown in the graph above) -- e.g., slack work or business conditions, or could find only part-time work -- jumped by 5.1 million; many in this category had been full-time workers. Those working part time for non-economic reasons slumped by 8.2 million, while multiple-job holders fell by 1.8 million. 

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For a “sanity test” of the employment numbers, we consult employment withholding taxes published by the U.S. Treasury. Although “noisy” and highly seasonal, the data show the amount withheld in April fell by a record $73.0 billion, to $182.6 billion (-28.6% MoM; -14.6% YoY). To reduce some of the monthly volatility and determine broader trends, we average the most recent three months of data and estimate a percentage change from the same months in the previous year. The average of the three months ending April was 0.3% below the year-earlier average.

The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.