May

The U.S. economy remains in an enormous jobs deficitThe labor market was down 15.9 million jobs at the end of April (JOLTS data), and down 19.6 million at the middle of May (jobs data)

By Elise Gould • July 07, 2020
Next update: August 2020

Last week, the Bureau of Labor Statistics (BLS) reported that, as of the middle of June, the economy was still 14.7 million jobs below where it was in February. Today’s BLS Job Openings and Labor Turnover Survey (JOLTS) reports that the labor market was down 13.1 million jobs at the end of May. The labor market began picking up in May, and more so in June, as states began relaxing their stay at home orders. Congress’s aid to workers and households also helped to boost demand and spending. Unfortunately, what’s clear from the latest coronavirus data is that the relaxed restrictions on social distancing also had the effect of increased cases and subsequent re-shuttering in certain parts of the country.

Today’s data show that at the end of May, the number of hires increased by 2.4 million to a series high of 6.5 million—the largest monthly increase and largest number of hires on record (series began in 2000). The hires rate also rebounded significantly to 4.9%, the highest rate on record. At the same time, layoffs dropped considerably to 1.8 million, consistent with the average number of layoffs in the pre-coronavirus period. This is a significant fall off from previous months. In April and May, layoffs totaled 19.2 million. Further, 1.8 million layoffs is much lower than the initial unemployment insurance (UI) claims we saw in May. In May, there were more than 8 million initial UI claims in regular state programs. This suggests is that a significant share of the initial UI claims in May were from layoffs in March or April, and people either waited to file claims until May, or state agencies were working through backlogs of claims.

Unfortunately, there are more recent indicators that layoffs are going to pick up again as people being laid off for the second time and hires will likely slow as well.

Pre-coronavirus, there were typically around 3.5 million voluntary quits each month, or a rate of about 2.3%. A large number of quits signifies a healthy labor market where people can leave their job to find one that is better for them. The quits rate increased from 1.4% in April to 1.6% in May, but is still well below its pre-virus level, underscoring that workers lack confidence in the labor market. Even at this low level, it’s likely quits would have dropped even further if not for the fact that people were counted who had to, for example, leave a job to take care of a child whose school or child care center closed as a result of the virus.

The ratio of unemployed workers (averaged for mid-May and mid-June) to job openings (at the end of May) is about 3.6 workers to every job opening. On average, there were 19.4 million unemployed workers while there were only 5.4 million job openings at the end of May. This demonstrates tremendous continued slack in the labor market; for every 36 workers who were officially counted as unemployed, there were only available jobs for 10 of them. And, this misses the fact that many more weren’t counted among the unemployed.

Even with the measurable gains in May as shown in improvements in hiring and layoffs in the JOLTS data and in increases to payroll employment and declines in unemployment in the Jobs data through mid-June, the recovery thus far just begun to fill in the mammoth losses in March and April. Unfortunately, more trouble is on the horizon as coronavirus cases continue to rise, states begin to re-shutter, and unemployed workers face further economic devastation when the unemployment insurance enhancements expire on July 25. Without further aid to workers and their families as well as state and local governments, the economic pain will be with us for a very long time.