Could have been worse, and probably will be soon

The US and Canadian employment data for April were expected to be a horror show.  They were. 

In the US, non-farm payrolls fell by more than 20 million in the month, pushing the unemployment rate to 14.7 percent. That marks the highest level for unemployment since the monthly BLS data began in 1948, though it remains far short of the 25 percent rate reported (on a different statistical basis) during the Great Depression. In effect virtually all of the jobs added in the decade-long recovery from the 2008 financial crisis have been wiped out in the past two months.

As for Canada, StatsCan reported that employment fell by almost 2 million in April, bringing the total job loss over the past two months to more than 3 million.  The unemployment rate jumped by 5.2 percentage points to 13.0 percent, just short of the all-time high of 13.2 percent posted in December 1982.  Comparisons with the Great Depression are not exact, but it appears the urban unemployment rate in 1931 was already about 19 percent, with a peak national rate of 30 percent two years later.

In assessing where the figures will go next, it is important to keep in mind the timing of the surveys on which the BLS and StatsCan base their data. By and large the figures reflect the position at mid-month. US weekly initial jobless claims data have continued to show job losses since that time, albeit at a reduced pace. The cumulative job loss shown by the claims data has reached 33 million, compared to the 22 million decline in non-farm payrolls in the past two months.  This suggests more bad news in May, with some estimates pointing to an unemployment rate near 20 percent. 

The StatsCan report linked above specifically addresses the timing issue, noting that lockdowns in all Provinces were fully in effect during the week of the survey.  However, the report also notes that the headline statistics understate the degree of labour force underutilization in the month, suggesting that, as in the US, more bad news may be coming in May. The fact that the number of newly-unemployed for the past two months falls far short of the 7.5 million who have applied for emergency benefits points to the same conclusion. 

A tentative conclusion from all this is that April may well turn out to have been the worst single month of the coronavirus-induced labour market meltdown, but May could mark the low point -- or, if you feel more optimistic, the turning point.  States and provinces are starting to ease their lockdowns, so there should be some recovery in employment in both countries in the coming weeks, but this will probably become evident too late for the May surveys by the BLS and StatsCan. Jobs will reappear much more slowly than they vanished, and in the event of a serious second wave of the virus, all bets will be off.