This morning, the Bureau of Labor Statistics (BLS) released “The Employment Situation – July 2020.” It reported the US economy created a total of 1.763 million net, new payroll jobs last month. That is huge number, and would have been unbelievable in simpler times. However, no one in the business of making economic predictions and forecasts has ever seen such weird data, let alone lived in such, shall we say, ‘un-simple’ times.
Yesterday, a client and friend asked me what I thought the number would be, and I told them I hadn’t a clue. When you consider the range of the estimates in the Bloomberg survey for the release was 3.81 million (from a loss of 600K to a gain of 3.21 million), you can reasonable intuit ‘Wall Street’ is throwing darts at the wall. Shoot, the standard deviation of the estimates was a jaw-dropping 820K!
To put that number into perspective, since the inception of the Employment Situation report in February 1939, there were only two months, two, when job gains where greater than 820K prior to 2020. The economy created 1.118 million jobs in September 1983. In March 1946, it added 951K. That should give an indication, a suggestion, of how blind economic forecasters are flying right now.
As such, I told my buddy I was going to focus my attentions on the Labor Force Participation Rate (the percent of working-aged, non-institutionalized adults who are actively participating in the workforce) and the economic sectors with the biggest gains and losses. Historically, this percent is higher when the economy is robust, and lower when it isn’t. This time last year, July 2019, the Labor Force Participation Rate was 63.5%. In April 2020, it had fallen to 60.3% as politicians ‘locked down’ state and local economies. Last month, it had increased to 61.6%, signaling slightly better economic times.
So, what would it be today?
Intuitively, at least to me, a number greater than 62% would have suggested continued growth in workforce confidence. Less than that would have suggested a ‘plateauing’ labor market, at best. For grins, the survey estimate was for an increase to 61.8%, although there were only 9 participants. Unfortunately, it came in at 61.4%, lower than last month despite the large increase in job growth. That isn’t horrific, but it certainly isn’t moving in the right direction.
Also, job growth seemed to be largely ‘contained’ to a few economic sectors and demographic characteristics. First, job growth was greater for women than men last month, with females accounting for 56.8% of job gains despite representing only 46.9% of the labor market. Second, job gains for men where disproportionately skewed towards single males. They accounted for 88.7% of ‘male job growth,’ while representing only 42.6% of the men participating in the survey.
As for skillset(s) and educational attainment, the segment “High school graduates, no college” easily had the best growth. It wasn’t even close. This group accounted for an eye-popping 73.2% of the job growth reported by the folks who responded to the question about educational attainment. Yet, it comprises only 25.1% of the labor pool. By comparison, college graduates represented 9.4% of the growth, despite being 47.8% of the workforce.
All of this data comes from the Household Survey. The ‘official’ payroll number and economic sectors come from the Establishment Survey. I won’t bore you with the differences between the two except to mention the former is a study of individuals’ responses and the latter is from actual employers.
So, with this information, I could reasonably intuit job growth would be skewed towards lesser skilled positions in economic sectors where females constitute a higher percent of the workforce. Admittedly, that might not be politically correct, but that doesn’t make it any less accurate.
According to Table B-5 in the report, women represent a majority of employees in the following economic sectors: 1) financial activities (56.5%); 2) education and health services (77.1%); leisure and hospitality (53.3%); 4) other services (52.5%), and; 5) government (57.7%). These 5 sectors accounted for 50.9% of all payrolls in July 2020, and, get this, 72.5% of last month’s gains (1.278 million / 1.763 million).
Within these 5 economic sectors, women accounted for 848K of the 1.278 million new jobs, or 66.4%. By comparison, women constitute 62.7% of the workforce in these combined sectors. Further, these 5 represented 74.5% of all female job growth.
Whew…getting down into the weeds, huh? Confused yet? I am beginning to regret I chose this topic.
This is NOT surprising, because these sectors (with the possible exception of government) have been hit the hardest by the pandemic. As a result, females had suffered a majority of the job losses due to the pandemic, especially since January 2020. Intuitively, the jobs lost due to the pandemic-induced economic shutdowns would be the first to return when the economy ‘re-opened.’ This is indeed what has happened the last two months, as female job growth has accounted for 61.0% of all job growth over the last two months.
As for educational attainment, you know the story. The least educated in our workforce took the biggest hit as economies shutdown. It wasn’t even close. From the end of January through the end of May, workers without any sort of formal, traditional education past HS, accounted for a whopping 62.9% of job losses while being only 33.4% of the workforce.
So, in an attempt to start wrapping things up, the pandemic has hit our female and lesser educated workers the hardest. They have suffered the majority of the job losses, even if they have experienced greater growth over the last two months. This is largely due to the nature of the shutdowns and the economic sectors they most negatively impacted. They just so happened to be female heavy industries. What is the old saying? “It isn’t personal; it’s just business.” While true the majority of the time, it doesn’t make anyone feel better and no one really believes it.
In the end, large parts of this morning’s Employment Situation report were sort of predictable. That women non-college educated workers would have the greatest job growth was to be expected, at least somewhat. That the numbers were as large as they were was nice. However, the fact people dropped out of the workforce as the economy continues to re-open (as evidenced by the lower Labor Force Participation Rate) is a little concerning. It suggests a couple of things, and perhaps a combination.
First, you have to participate in the workforce in order to claim unemployment benefits. As we all know, the CARES Act provided for an additional $600/week from the Federal government the end of July. It is very conceivable some segment of the labor pool took advantage of the system to claim this benefit. Just maybe. Second, the data suggests the economy isn’t necessarily creating new jobs, just replacing them as needed as local economies re-open. While this is certainly better than the alternative, Frederic Bastiat’s ‘parable of the broken window’ comes to mind. That is, you can stimulate an economy by breaking a window, but you can’t base an economy on broken windows.
To that end, you can stimulate economic growth by re-opening a closed economy. However, you can’t base long-term economic growth on closing and re-opening your economy.
In a nutshell, 1300 words later, THAT is what I learned from this morning’s “The Employment Situation – July 2020” report.
Take care, have a great weekend, and wear you mask!
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