The jobs numbers have been so bad that even the good news is bad news

Key Points
  • Even good news was bad news for the latest jobs numbers.
  • A rise in hourly earnings came largely because layoffs were concentrated in lower-earnings jobs.
  • Also, the rise in the unemployment rate would have been even greater if it had captured the 1.6 million workers who left the labor force.
Melinda Walker (R) shakes hands with Angelina Tennis, a recruiter at First Command Financial Services, during a job fair.
Getty Images

There hasn't been much to smile about when evaluating the recent jobs data in the U.S., with millions heading for the unemployment lines and the immediate future offering little hope.

Even the one positive glimmer that came from Friday's nonfarm payrolls report just showed how bad things have gotten.

Average hourly earnings rose 3.1% in March from a year ago, a touch better than expected and seemingly a continuation of a general upward trend that started in November 2017. Earnings growth has stayed at 3% or better every month since August 2018.

However, the primary reason the number looked good was because so many low-wage numbers were laid off during the month, painting a skewed picture that did not reflect just how bad of a period it was for service workers in particular.

Of the 701,000 workers who lost their jobs during the month, 459,000 came from leisure and hospitality, mostly from bars and restaurants, according to the Labor Department. That made the wage bump mostly artificial and not representative of what workers are experiencing.

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"That is a very misleading number. It's caused by the sheer elimination of low-wage jobs," said Dan Alpert, a Cornell Law School professor and developer of the Jobs Quality Index, which measures not just job creation but the proportion of high-paying versus low-paying hires and layoffs. "An increase in average hourly wages due to the fact that you're losing people at the bottom is not a good indicator."

The index had been showing a trend where lower-end jobs were disappearing faster. In March, the gauge indicated that more than 93% of the positions lost paid below the median weekly wage for all production and non-supervisor positions. Consequently, the wage numbers for March and likely subsequent months won't be reliable gauges for the job market's health.

In fact, a number of data points that economists, Wall Streeters and the public watch won't paint a true picture of what's happening.

"You've got a lot of strange data points in this report," Alpert said. "This is the tip of the iceberg in terms of the overall loss of jobs."

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Worse numbers ahead

Indeed, even a spike in the headline unemployment rate from 3.5% to 4.4% didn't reflect the true jump in joblessness. 

That number doesn't include those not looking for work, so it didn't reflect the 1.6 million workers who left the labor force. A large reason for that move was because many workers were restricted in their movements due to social distancing policies put in place to combat the coronavirus spread. 

A more accurate representation came from a separate measure that includes discouraged workers as well as those holding part-time jobs for economic reasons. That number lurched from 7% to 8.7% and will bear closer watching in the coming months rather than the headline figure that the government focuses on in its monthly report.

Moreover, the true job loss in March was not even remotely reflected by the number the Bureau of Labor Statistics released Friday. The count sampled the week ending March 12, which was before the move to social distancing intensified.

Coming after consecutive weeks that totaled 10 million first-time filings for unemployment insurance, the March report only scratched the surface.

The release next month could show as many as 13 million jobs lost and the bad news won't stop there, said Beth Ann Bovino, chief U.S. economist at S&P Global Ratings.

"We had expected a total of 16.5 million jobs lost by May, but jobs losses are coming at a faster pace and sooner than we initially thought," Bovino said. "Unfortunately, it could be much deeper, and while once unthinkable, we now expect a total of well over 20 million jobs lost by May. While hard to comprehend, it's becoming very real."

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The unemployment rate, even the one that discounts those who aren't looking for work and the underemployed, likely will rise above 10%. The St. Louis Federal Reserve has put forth a worst-case scenario of 32%, but most other economists figure it will be in the 10% to 15% range.

Though their accuracy in describing the true state of unemployment will be questionable, the numbers could be enough to push Congress to enact a fourth leg of economic stimulus, said Andrew Hunter, senior U.S. economist at Capital Economics.

"We remain hopeful that many of those job losses could be reversed quickly once the virus is brought under control – after all nearly all of the surge in the number of unemployed was due to temporary rather than permanent layoffs – but it's clear, that the pandemic is already having a more significant impact on the labor market than most had expected even a week ago," he said.

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