The April jobs report was a tragedy of historic proportions – an unmitigated disaster.
The cumulative financial and psychological toll on workers and their families when more than 20 million people lose their jobs in the space of a single survey period is simply unfathomable.
Even if you’re inclined to point to topped-up monetary assistance for the newly jobless (see here), it’s important to note that the financial precarity which goes along with losing one’s wage is only part of the suffering. The loss of dignity and sense of self-worth is devastating, especially for a given household’s primary breadwinner.
On Friday, following April payrolls, both Larry Kudlow and Kevin Hassett did their best to express empathy. Kudlow called the numbers “full of heartbreak and hardships”, while Hassett echoed those sentiments, calling the unemployment figures “heartbreaking”. (It’s almost as if there’s a White House script mandating use of the word “heartbreak”.)
While both men admitted that things are likely to get worse before they get better, Kudlow and Hassett were keen to point to the purportedly “temporary” nature of the layoffs.
“Three-quarters of today’s numbers are temporary layoffs”, Kudlow remarked, adding that people expect to go back to work.
Hassett parroted the same line, noting that almost all of the newly unemployed expect to be rehired by their employers.
As you can imagine given the visual, the number of people who are classified as “temporarily” beset surged as a percentage of the total jobless.
In fact, that figure is now nearly 80%.
Supposedly, this is the “silver lining” in what is otherwise the single worst top-tier headline print in the history of modern economic statistics.
Erica Groshen, former commissioner of the Bureau of Labor Statistics, explains this as follows (this is from a short commentary posted to Cornell’s website earlier this month):
This really matters for our eventual recovery from this recession. Why? The more that employers use furloughs rather than pink slips, the more likely we are to have a speedier, more productive, and less stressful recovery. In the past, most workers on temporary layoff have been recalled to their former jobs. When they are, they can show up for work and be immediately productive because there’s no need for job search, recruitment, background checks, onboarding, training, getting to know teammates, etc. No firm-specific knowledge is lost. Furthermore, while they await recall, workers likely won’t delay as much consumption as if they faced the greater uncertainty of needing to find a new job. By the same token, employers are spared the uncertainties of getting the skilled workforce they need, so they can make the purchases they need to be ready to start up again. Indeed, during the last three recessions, employers made mostly permanent layoffs — and the recoveries that followed were called “jobless” by many because it took so much time for jobs to rebound after other growth picked up.
So, a couple of things about that. First, it’s simplistic to the point of being tautological. That is, yes, assuming the layoffs are temporary, then the pieces fall neatly into place after that. But, again, that entire excerpted passage is just one long tautology. Basically, it says this: “If the layoffs are temporary, they won’t last forever”.
But, more importantly, the sectors hit hardest in this crisis are those where the workers cannot afford to be out of work even for a week, let alone a month or longer. Even if they can survive financially, the knock-on effects can be devastating.
As long-time readers are apprised, before my body dictated a total cessation of alcohol consumption, I was once a fixture at local dive bars and sushi restaurants on the island I’m fortunate enough to call home. Prior to that, I habitually blew through obscene amounts of money at Manhattan bars and restaurants, and before that, in another large city. I made it a point to know everyone, from the front of the house, to the back of the house, to management, to the owners (the latter isn’t always possible, but it usually is at locally-owned establishments). Over decades, I became as familiar as familiar gets with the business, without ever actually having run a bar or a restaurant.
One server who I got to know locally about three years ago is now out of a job. Servers at nice establishments make more money than you probably think they do (and certainly more than the IRS knows about by virtue of cash tips), but that doesn’t change the stigma attached to their inherently volatile cash flows. This particular friend had nearly $20,000 squirreled away, a meager sum in the grand scheme of things, but considering her living arrangements, a sufficient amount to cover most expenses in cash for quite a while, which is more than you can say for many over-leveraged Americans. When it became apparent that all restaurants would soon be shuttered, she paid her rent for the remainder of her lease out of an abundance of caution.
Guess what happened next? Her landlord informed her that after the lease was up, she would not be able to renew it, due to the uncertainty that will invariably cloud the industry in which she works once the economy reopens.
That is not an isolated example. On Wednesday, I spoke with a young lady who used to bartend at one of my favorite local haunts. To my surprise, she was relaxing on the beach a mere two miles up the street. That was an unexpected piece of news for me, because the last time I spoke with her, she was in New York, where she moved three years previous. She claimed that nothing “went wrong”, but it didn’t take a leap of logic for me to surmise that her return to the island (where she knows nearly everyone) was almost surely due to her having lost her hospitality job in the city. She later verified as much.
Let me spoil you some suspense: The first friend mentioned above has no idea where she’ll be living past July, and the second friend has no plans to return to Manhattan. I am currently providing “bridge financing” (to quote Steve Mnuchin) to both of them to ensure they do not find themselves in dire straits.
These are, of course, anecdotal examples. But they are true stories. Both of these young women have been immortalized in my various musings over the years. Those who have been with me from the beginning will know the second friend as one of the two Albanian girls from a post I once penned on CLO tranches.
Make no mistake, these are not unique cases. Everyone likely knows someone in similar circumstances, whether it’s a friend, a son, a daughter, a grandchild, or merely an acquaintance.
For many of the folks captured in the large red bar which features prominently in the visual below, life will never be completely the same.
Not everyone seems to understand this, though.
“Not to parse words, but he said almost all unemployed expect to be rehired by [their] employer, which is one way of spinning the figures”, Bloomberg Opinion columnist Brian Chappatta chided, in response to a tweet of mine lampooning Kevin Hassett’s assertion that most of the newly jobless will be back to work soon.
“18.1 million of the newly unemployed reported being on temporary layoff, whereas only two million viewed their job loss as permanent”, Chappatta went on to say, before calmly explaining the situation for all of us simpletons:
Obviously whether those are truly temporary layoffs is the big question. But that distinction is nonetheless being cast as the “silver lining” in this jobs report.
The truth is, only a tiny fraction of the 18.1 million people represented in the first chart above are any semblance of certain about their future employment prospects. As Chappatta tacitly admits, that is “obviously” a dubious figure, and if I were working for the proverbial “next man”, as Chappatta does, I’d be knocking on the nearest piece of wood right now.
In any event, Larry, Kevin, Brian and 18 million people are on the same “silver lining” page. But you should note the critical distinction. Larry, Kevin and Brian are on that page because it’s in the script they’re reading from. 18 million jobless Americans and their employers are on that page the same way I used to characterize my “single male” status as “temporary” – I hoped it was an accurate description, but I didn’t necessarily believe it.
For what it’s worth, Donald Trump is confident that the damage can be undone.
“It’s totally expected, there’s no surprise”, the president told Fox News on Friday, commenting on the jobs numbers. “What I can do is I can bring it back”.
Maybe he can.
How hard can it be, right? After all, three-quarters of the job losses are “temporary”.
(I’m still single, by the way.)
“Three-quarters of today’s numbers are temporary layoffs”. After which, we settle in with an unemployment rate about double that of last winter. Bullish!, I mean, bullshit.
Pray for a vaccine that works. It’s the only cure I see that will give people the required comfort of returning to theaters,, restaurants, cruise ships, casinos and sporting venues any time soon. Etc.
Nearly half of Americans have said they would not take the vaccine if it was available….so what now?
Horrifying but not surprising if true. Where did that stat come from?
MSNBC this morning. Haven’t fact checked yet, but no reason to doubt that it comes from some pollster or other…for what it is worth, I’m not surprised
Miami Herald says 36% would refuse.
Thank you.
I wonder how the narrative of “they will all start shopping & attending events once there is a vaccine” will hold up if so many people refuse to take it.
Maybe it doesn’t matter. Refusing the vaccine will join refusing to wear a mask as another “Red Badge of Courage” against the liberal oligarchy seeking to steal away our liberties.
Yes, ignorance and stupidity are best friends.
One PhD principal scientist (me) suggests that there could be no vaccine. Immune response will weaken after one-two years and most people will be sick again. In this case humanity will have to adapt to this disease like it had already adapted to flu, common cold or norovirus. Those with the weakest immune system (about 1%) will decease, rest will get used to corona. This year could be second big outbreak, next year will be two smaller outbreaks and from 2022 it will become a regular cold.
I suspect that is a pretty accurate forecast. My wife spent five years in a nursing home with advanced Alzheimer’s and had regular bouts with undiagnosed respiratory distress. Didn’t kill her but it sure made her frequently miserable.
i’m just amazed at how stupid the talking heads think we are, or have proven to be in the past. Dr H has done two fabulous things in these posts … a) making sure we do NOT forget that these numbers are people, not integers on a spreadsheet, and b) the absolute hilarity (fallacy) of the spinning … thanks Dr. H, and don’t let up.
I heartily endorse Michael’s sentiment.
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80% is a fantasy number. it could only become a reality if things get back to a semblance of normal very quickly. that prospect is not so likely. next best is a realistic but optimistic assessment that things will come back after some adjustments. maybe 40% go back to their old employers. maybe 30% go back to a different employer but the same line of work. the other 30% are going to either retire, go on disability, or eventually find another line of work. however, you slice it, unemployment is going to be elevated for quite some time and there is going to be a lot of suffering.
H – your reports from people you know and those on the island are the best.
Unless I missed it, you haven’t reported on your neighbor, the guy with the cars that you talk to in his driveway.
What’s he up to these days? The last report I read he thought things were great in an oblivious sort of way.
Any good updates about him?
Clarification – your reports are the best. Sorry to hear these two women are in difficult situations.
I guess if “only” 2 million wind up permanently unemployed it just a temporary dip — before long we will rocket back to the deficit, ZIRP (if not NIRP), QE fueled recovery with unbelievable growth rates that will slingshot the economy back to its 2019 level in 10 years or so. . .
Temporary… until they’re permanent. I’ve been seeing restaurant and bar closures rapidly growing. Looking forward operating with roughly 50% less seating is going to prove untenable and only restaurants that can subsist on takeout and delivery can survive this long term. Mall’s and many shopping centers will likely have inadequate shoppers for the better part of 2 years. I suspect at least 90% of these layoffs will last 3-6 months minimum and 50% will prove permanent if not more. Don’t forget many industries are looking at the new normal and will likely begin layoff in coming months. This is going to be like falling down a flight of stairs in slow motion.
And let’s not forget that labor force participation was on the decline with automation and demography presenting major challenges before the Covid 19 hit.
I think the mall / large shopping center is about to go the way of the post-war urban commercial center. The pandemic is speeding up that process.
I’m very curious what restaurants / eateries will do. Will eating out be an expensive privilege / experience that is heavily charged while the masses get delivery out the back?
Great point about restaurants, BB.
In the same vein, I wonder how Main Street America feels if they bother to watch the (non-Fox) news tonight. “Dow rallies almost 500 points as unemployment hits 15%”
H, I liked your Tweet about the asteroid.
Say not thou, “Why were the former days better than these?” For thou dost not inquire wisely concerning this.
Much like “Mexico will pay for the wall”, “China pays the tariffs”, “Looks like by April, you know, in theory, when it gets a little warmer, it miraculously goes away”…
https://www.nytimes.com/2020/03/15/opinion/trump-coronavirus.html
“Those jobs will all be back, and they’ll be back very soon,”
Will anyone hold this administration and party accountable for lies? Will the U6 be the swing votes in November?
https://m.investing.com/economic-calendar/u6-unemployment-rate-1670
Good for you for helping others. I honestly think it is our moral obligation to help those in need. We have been fortunate in life. Time to build others up, help them battle through the challenges and come out better. May not be economically better in the end but personally better. Many people are going to face difficult decisions in many ways. If we can help them avoid the bad ones and come out better I think we actually made a difference in this world.
Wow, 20 comments, and all are great. Not only do I appreciate Walt’s content and style, but also the intellect and perspective of his readers.
As for these equity markets… No one whistles by a graveyard like Wall Street guy.
This is more than numbers on a bar chart. In our life, and in the lives of those we love and know well, we are experiencing death of loved ones, financial loss, loss of livelihood and a path forward, inability to visit parents/grandparents/loved ones who are geographically distant, uncertainty and a heightened sense of needing to “batten down the hatches” and save money/spend less, not only for ourselves but so that we can financially help our recently launched children, if needed.
There are some joyful personal connections that are occurring in our circle as well- as suddenly faced with “safer at home”, barriers between people that love each other but could not commit are being broken down and in the face of “armageddon”, the truth of what is important in life is rising to the top.
I am a dreamer and I hope that Prof H will be lucky enough to find someone to “shelter in place” with, with whom he can find some joy and happiness. What a special person he seems to be.