The Weekly Briefing - May 11th, 2020

In This Week’s Brief

April Jobs Report Dire but Understates Economic Damage Job Losses No Longer Limited to One Corner of the Economy Gen Z and Younger Millennials Bearing the Brunt of Job Losses

Market Notes

April Jobs Report Dire but Understates Economic Damage The jobs report released by the Bureau of Labor Statistics (BLS) on Friday puts the unemployment rate at 14.7%, the highest level in decades. The BLS noted, however, that large numbers of people appeared to have misstated their status and that the actual unemployment rate is in fact closer to 20.0%. It is BLS policy, however, not to restate this data even when large anomalies are discovered. As bleak as the April jobs report was, however, Federal Reserve Bank of Minneapolis President Kashkari believes, “the worst is yet to come on the job front, unfortunately.” The BLS derives employment figures from surveys conducted before the middle of the month, and unemployment claims have continued to mount since then, albeit at a decelerating pace. Although unthinkable just a few weeks ago, the high unemployment estimate still fails to capture the full breadth of economic distress across the U.S. economy. The official unemployment rate is based on the “U-3” data, but it does not include (1) discouraged workers who have given a job-market related reason for not looking for work, and (2) people who are employed part-time purely for economic reasons (i.e. had hours cut back). These are included in the “U-6” data, shown below. The “U-6” Chart: Historical Unemployment and Underemployment as a Share of the Labor Force One silver lining in the report, however, is that 90.0% of those who became unemployed in April describe their job loss as temporary, providing hope that at least a segment of the nation’s labor force will quickly return to work after the economy reopens.

Job Losses No Longer Limited to One Corner of the Economy While the March jobs report indicated job losses up to that point had been largely limited to leisure and hospitality, it is clear from the April report that every sector of the economy is now feeling the pain of the COVID crisis. Sectors where remote work is more likely to be feasible, such as financial activities and information, experienced the fewest—but still sizeable—job losses. Even government, which is typically more resilient to a downturn, has seen total employment fall by 4.4%, largely as a result of school closures. Percentage Change in Employment by Industry since February 2020

Gen Z and Younger Millennials Bearing the Brunt of Job Losses As the economic slowdown deepens, the outsized toll of the COVID crisis on younger workers is beginning to come into focus. A survey by the Pew Research Center conducted in mid-April found that people between the ages of 18 and 29 were the most likely to report that someone in their household had lost a job as a result of COVID-19. They were also the most likely to say someone in their household had seen their hours reduced or wages cut. Young adults’ worsening economic situation could cause household formation to slow through the crisis, which would dampen demand for new housing in the short-term. The share of people in their late 20’s living with their parents surged after the Global Financial Crisis (GFC) as it became more difficult for younger workers to obtain decent-paying jobs, rents increased, and marital rates dropped. The Pew survey also found that those between 18 and 29 were the least likely to have sufficient savings to cover three months of expenses in case of an emergency. Millennial finances have been slower to recover from the GFC compared to older Americans in part because of high student debt levels as well as an inability in the wake of the GFC to capitalize on low stock and home prices. Consequently, many millennials find themselves ill-prepared for the current crisis. Number of Young Adults (18-34) Living at Home (in thousands)

Disclosures and Disclaimers

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