What to watch on jobs day: A false start to the recovery
The latest jobs data for June released this Thursday will likely show some improvements in the labor market. We should remember that these improvements come at a cost: increased spread of COVID-19. In the states that have lifted restrictions ahead of others, there are measurable increases in coronavirus cases. Given the likelihood that states may have to re-shutter parts of their economies with the rise in cases, the job gains we saw last month may not last. So even if we continue to see job gains in this week’s jobs report, the losses this spring were mammoth and, given recent trends on the health front plus the upcoming fiscal cliff, the economic pain will certainly be long lasting.
On Thursday morning, we will also get the latest data on unemployment insurance claims for the week ending June 27. Later that day the Congressional Budget Office will be releasing their economic forecasts, which provide their estimates of future economic growth and the unemployment rate, among other key economic indicators. (At the end of the blog post, I list reminders on what information we get from each labor market data release.) Unfortunately, these releases will show enormous economic hardship that will last for a long time.
As I see it, policymakers have three primary objectives with regard to the labor market: First, make sure those who have to go to work are given adequate compensation and a safe work environment, which means, at a minimum, guaranteeing health and safety protections for workers so that they are able to protect themselves and members of their families from contracting COVID. Second, make it possible for workers who are unable to find a safe job to stay home without becoming financially devastated by delivering sufficient earnings replacement through the unemployment insurance system. Third, ensure the economy can fully recover when we get on the other side of the pandemic.
Unfortunately, workers facing health risks on the job are not proportionately receiving extra compensation or safety protections. More needs to be done to ensure that those working can continue providing for the economic and physical well-being of themselves and their families. On the second front, the $600 weekly supplement to regular unemployment insurance benefits is due to expire July 25 and its expiration will come at a huge economic cost to workers, their families, and the recovery. Further, too little is being done to provide aid to state and local governments, which will be key to a speedy and healthy recovery.
In the last jobs report for May, payroll employment increased, but the labor market was still left with a shortfall of nearly 20 million jobs. As these jobs return—again, not unambiguously a positive move as exposure to COVID-19 continues—it is important to track whether the recovery will be broad based. Between April and May, the employment gains were uneven: white workers saw a significant drop in their unemployment rate between April and May, while Black workers did not, adding insult to injury given their already disproportionate economic and health devastation from COVID-19. When it’s finally safe to fully reopen the economy, I hope the economic gains will occur across all groups. Unfortunately, if history is any indication, this is unlikely to be the case and the experience in May suggests the recovery is on its way to being deeply inequitable.
Another indicator to watch in the June report is public-sector employment. We’ve seen large reductions in state and local public-sector employment over the last few months. Given that a significant share of these are in public education and that they happened at a time of year when they wouldn’t usually occur, it’s possible we will see an artificial uptick in jobs in those sectors in June (and possibly more so in July since some school districts don’t end their school year until mid-June) when the seasonal adjustment would have smoothed out the end of the school year. So I’d warn data watchers to consider any gains with a grain of salt, and to look at the overall changes from February (pre-COVID-19) to June.
Federal policymakers need to act now to provide massive fiscal relief to state and local governments so they can continue to provide necessary services and prevent unnecessary cuts to their budgets as their revenue falls. In fact, they could do one better and increase public-sector employment through the hiring of additional public health workers and contact tracers. And, with hybrid school openings planned, there will need to be more public education staff, not less, in coming months. Further, schools and day care centers are essential for the true reopening of the economy, allowing parents to go to work knowing their children are safe and well cared for.
Key labor market indicators:
- The monthly employment situation usually comes out on the first Friday of every month (this month it will be Thursday, July 2). Among other things, it gives the total number of jobs added or lost in the economy between roughly the midpoints of the prior two months (so on Thursday, we will learn how many jobs were gained or lost between mid-May and mid-June). One detail that is often brushed over about the monthly jobs number is that it is actually the net number of jobs added or lost. The net change in jobs is affected by gross changes in many things—the number of hires, the number of layoffs where people applied for UI, the number of job losses where people didn’t apply for UI, voluntary quits, and worker deaths. All of those components are moving right now.
- The weekly unemployment insurance (UI) claims data come out every Thursday morning. They tell us how many people applied for UI in the prior week. The UI claims data provide crucial, but limited, information because there are a lot of moving parts in the labor market aside from people who lost jobs and applied for UI. The data that comes out this Thursday will provide information on UI claims through June 27.
- The monthly Job Openings and Labor Turnover Survey (JOLTS) is typically released early-to-mid-month. JOLTS provides information on the moving parts that go into the net change in the number of jobs—job openings, hires, layoffs, voluntary quits, and other separations (which includes worker deaths). The next JOLTS release will be Tuesday, July 7, and it will cover labor market changes between the end of April and the end of May (so even after that release, the JOLTS data will be roughly two weeks behind the monthly employment data in terms of coverage, which will cover through mid-June).