As we were going into the crisis caused by the novel coronavirus, I predicted it would be worse than 9/11 and the Great Recession combined. I undershot considerably. We reached the death toll of 9/11 less than three weeks later. And the economy is in far, far worse shape than it was in 2009.
Yahoo Finance (“April jobs report: U.S. employers cut a record 20.5 million payrolls, unemployment rate jumps to 14.7%“):
The U.S. economy shed a record 20.5 million payrolls in April and the unemployment rate jumped to 14.7%, as the coronavirus pandemic forced businesses across the country to temporarily shut down and lay off or furlough workers.
Here were the main figures from the U.S. Department of Labor’s report release
*Unemployment rate: 14.7% vs. 16.0% expected and 4.4% in March
*Average hourly earnings month on month: +4.7% vs. +0.4% expected and +0.5% in March
*Average hourly earnings year on year: +7.9% vs. +3.3% expected and +3.3% in March
Estimates for April’s change in non-farm payrolls and unemployment rate each spanned a wide range, as economists grappled with gauging the damage as businesses across the country had to cut jobs at a historic rate.
At 20.5 million, the actual decline in payrolls for the month was by far the worst on record, according to government monthly payrolls data spanning back to 1939. The worst fall in payrolls amid the global financial crisis was by 800,000 in March 2009.
April’s decline follows March’s downwardly revised payrolls drop of 870,000, which captured just the very start of the nationwide lockdowns and business closures, since the Labor Department uses the week of the 12th for its reference period.
The unemployment rate surged to 14.7% in April, representing both the largest one-month jump and highest level on record based on monthly Bureau of Labor Statistics (BLS) data spanning back to 1948. The monthly unemployment rate was estimated to have been about 25% at the peak of the Great Depression in 1933.
So, we’re at the worst unemployment rates since we started keeping records—during the Truman administration. We’re probably not at Great Depresssion numbers yet but frankly a lot of that is a function of so many of us having the ability to work remotely thanks to the wonders of modern technology. (Then again, we have far fewer self-employed agricultural workers, too.)
And the numbers are probably understating the severity of the crisis:
The jobless rate would have been nearly 5 percentage points higher, if workers were classified differently during the survey data collection, the BLS added in a note.
There was “a large increase in the number of workers who were classified as employed but absent from work,” the BLS said. “As was the case in March, special instructions sent to household survey interviewers called for all employed persons absent from work due to coronavirus-related business closures to be classified as unemployed on temporary layoff. However, it is apparent that not all such workers were classified.”
“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),” it added.
While I was a kid, I vividly remember the long “stagflation” period of the 1970s. We had high unemployment rates compounded by high inflation. Economist Arthur Okun coined the term “Misery Index” for the sum of the two and Jimmy Carter used it to oust Gerald Ford from the White House in 1976. (And Ronald Reagan returned the favor in 1980.)
Thanks to near-zero interest rates from the Fed, inflation has been a non-issue since the mid-1980s. But the current unemployment rate itself in higher than the 12.7% Misery Index that got Carter elected.
