Economy

Economic Data Roundup (05/28/2020)

5/28/20 8:00 AM

The latest regional job report from the U.S. Department of Labor revealed that nonfarm employment decreased in all 50 states in April. The largest absolute losses occurred in California (-2,344,700), New York (-1,827,300), and Texas (-1,298,900) last month, while the biggest percentage declines were found in Michigan (-22.8 percent), Vermont (-19.6 percent), and New York (-18.8 percent). As for joblessness, the unemployment rate rose in all 50 states in April and set a record high in 43 states. Although the economic hit from the shelter-in-place orders and other efforts to stem the spread of the coronavirus has been undeniably severe across the whole country, there are also large regional variations in damage. The highest rate of joblessness, for instance, was found in Nevada (28.2 percent) in April, while Connecticut had the lowest unemployment rate (7.9 percent). The difference between those two extremes is an unprecedented 20.3 percentage points. For some additional perspective, the highest jobless rate in the entire country at the end of 2019 was only 6.1 percent in Alaska. Further, 27 states had unemployment rates lower than the national level (14.7 percent) in April, and 10 states had higher rates. Such regional differences are due in large part to the types of employment that dominate each state, e.g. in Nevada leisure and hospitality workers account for a substantial share of the labor force.

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The economic recovery should also be uneven, at least at first, because the lifting of the lockdowns has been far from uniform. For example, some states were already “reopening” in late April, while others still have comprehensive restrictions on business and travel in place. One of the best indicators of how quickly businesses are rehiring the workers they had let go while the lockdowns were in full-effect is continuing claims for unemployment insurance. This metric should level off and then decline as hirings start to outpace separations, and there is already evidence that this could be occurring in Georgia, the first state to reopen. Lifting the lockdowns, though, is just one part of the recovery equation, and consumers’ willingness to leave their homes and spend is another key variable. Moreover, companies will not be quick to bring every worker back on the payroll if demand for their goods and services is slow to return. This, combined with potentially lingering occupancy restrictions that could limit the amount of workers businesses rehire, is the best argument for extending the temporary boost in weekly unemployment benefits beyond the current July 31st end date set by the CARES Act. To clarify, the extra $600 a week should eventually go away because otherwise the job search is disincentivized. However, just because the reopenings have so far gone very well it is still too early to declare victory and risk pulling the augmented benefits abruptly without any replacement or other offsetting measure. If those Americans yet to be rehired see their only income source suddenly slashed their knee-jerk response will be reduced consumption, and since businesses do not respond to falling demand by expanding their staff the likely fallout would be a much slower economic recovery. The arbitrary July expiry date should therefore be abandoned and instead some sort of economic goal should be established. One possibility is the national jobless rate returning to single-digit levels, after which the weekly benefit can start to be gradually reduced to pre-coronavirus levels, with newly proposed “back-to-work” incentives perhaps speeding up the process.

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Sources: Econoday, U.S. DoL, FRBNY, FRBSL

Post author: Charles Couch

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