After falling by 22.1 million between February and April, payroll employment rose by 2.5 million in May. This is likely due to the fact that 31 states started lifting stay-at-home orders, or easing restrictions, within the reference period. While these are welcome gains (as long as the health consequences aren’t offsetting), jobs losses since February still total 19.6 million, and are currently 13% below its February level. It is imperative that policymakers do not take this as a sign that it’s time to stop providing necessary relief to workers, their families, and state and local governments. The economic pain will be long-standing without additional aid.
Given the re-opening of the economy, it is not surprising that many of the job gains occurred in leisure and hospitality, construction, education and health services, and retail trade. Of particular concern are the public sector job losses. Employment continued to decline in government employment; local government education accounted for most of the decrease, with a loss of 310,000 jobs. Over the last three months, state and local government jobs have declined by 1.6 million, nearly half of them (759,000) in local government education (public K-12). These losses in public K-12 education are large, even when public schools were still in session, albeit from home, during the reference period. Further, it’s important to remember that public sector austerity in the recovery from the great recession meant that public school employment never regained its 2008 levels. Without sufficient relief to state and local governments, more cuts will come.
The unemployment rate declined to 13.3% in May, but is still up a whopping 9.8 percentage points since February. The figure below illustrates how the economic devastation was widespread but did not hit groups equally. Even with the mild improvement in May, the unemployment rate of all groups is still higher than the highest level the overall unemployment rate hit at the height of the Great Recession, when it reached 10.0% in 2009. The unemployment rates are higher for Black workers and Hispanic workers than for white workers. Research has shown that historically higher unemployment rates, lower wages, higher poverty rates, and lower liquid savings make job losses even more devastating for African American workers and their families. The unemployment rate for Latina workers was significantly higher than any other group, hitting 19.0% in May.
The official unemployment rate understates the extent of job loss and economic pain. Here, we calculate an “adjusted” unemployment rate of 19.7% in May, which includes those who are officially unemployed, the misclassified (the excess number of those who reported that they were employed but not at work for other reasons), and those who had been employed but left the labor force when the virus hit but would otherwise have been counted as unemployed if they were actively seeking work. The misclassified are calculated across various demographic groups as indicated by BLS’ discussion of Table C found here. They suggest that many workers who are classified as employed, but not reporting to work for “other reasons,” should be counted among the temporarily unemployed, not the employed.
Furthermore, millions of would-be job seekers have left the labor force in the time of COVID-19 for various reasons, whether it’s because they don’t see any prospects in their occupation, they are not looking because they are concerned about their health or the health of members of their household, or they have to care for a child whose school or daycare closed. When those workers, many of whom left the labor force during the stay-at-home orders, are added in to the number of unemployed, the “adjusted” unemployment rate would have hit 19.7% in May.
Nominal wages fell between April and May as lower wage workers re-entered the labor force. Over the year, nominal wage growth of 6.7% still reflects compositional changes in the labor force. At turning points in the economy, compositional effects tend to swamp any changes in wages within sectors or occupations or even workers grouped by educational attainment. As low wage workers continue to come back, wage growth will fall, as we saw in May. Stronger year-over-year wage growth between May 2019 and May 2020 still reflects the dropping of lower-wage jobs from the total, which results in higher average wages for the remaining jobs, and what appears to be faster overall growth, but not driven by people getting meaningful raises.