Commissioner's Statement on the Employment Situation

The Bureau of Labor Statistics announced that the May unemployment rate improved from April’s 14.7% to 13.3% in May. This improvement suggests that an additional 2.5 million found work in the past month, a decided difference from projections. Like much of what we see these days, the numbers are not quite what they seem… and the idea of the President crowing over an unemployment rate well in excess of any seen in 80 some years is somewhat surreal.

First of all, let’s get rid of one line of argument running around the internet. President Trump did not cause these numbers to be altered; that’s not an opinion, but a fact. The numbers are generated by an agency (the Bureau of Labor Statistics) that is notable for its lack of politicization, comprised of about 2,400 professionals, virtually all of whom have access to the source data. For there to be any interference with the final report, all of them would have to have agreed to silence. No way.

That said, the numbers are likely not what they are reported as. There are several reasons, all of which are substantial.

Quirky Numbers

Within the report, the BLS suggests that they understand that the numbers are understated. The specific term used was “a misclassification error”, which certainly isn’t a positive thing. Aside from the usual yes or no employed or not, there is a fairly unique third category: unemployed who listed their employment status as “other”, neither employed nor other employed, due to the weirdness of the virus. In a normal world, those would have been listed as unemployed, and the unemployment rate would have been about 16.3%. That said, the April numbers included the same error, and would have been about 19.7% instead of the reported 14.7% had all the numbers been reported. If anything, the nominal improvement may have been understated.

The BLS is investigating how to make the numbers more representative, so don’t be surprised if the numbers are substantially revised in the coming days.

The Very Temporary Impact of the PPP

The BLS has no mechanism for determining how many of the newly hired are being paid by their employer to work. That seems an odd statement, but remember that the goal of the Payroll Protection Plan was to compensate employers to retain their workers during the pandemic, providing actual money for the payroll of small companies. That money, without extension, runs out next month as does the need to keep those employees hired in order to not have to repay the loans.

It is important to note that the vast majority of the hires were in the hospitality and restaurant industries; those jobs are (a) typically low wage, and (b) precisely the jobs covered by the PPP. Take away those specific jobs, and the unemployment rate would have been around 20%.

Timing is Everything

The opening of various states in the middle of May is likely to have also altered the numbers; the surveys and analysis is not to the end of the month, but rather key to the middle. The initial binge of hiring that accompanied the opening — and anticipated opening — of much of the country’s businesses likely coincided with the report’s coverage, giving a push to the numbers that mattered.

It is likely that the mid-May period coincided with access by millions of businesses to the funds from the PPP, encouraging them to announce their hires. As noted above, it’s now a question of whether those hires will last beyond the required holding period.

A Particularly Unpleasant Feature of the Numbers

In attempting to celebrate the better than expected top-line numbers, President Trump proclaimed that this was a “great day” for the late George Floyd. Aside from the horrific lack of sensitivity in his statement, there was a particular irony that might have escaped his superficial scan of the numbers. While white employment improved, African-American employment actually worsened, yet another bitter reminder of the divide in so many aspects of American life. Painfully, the hiring came in precisely the fields that hurt the black community disproportionately on the way out; that the initial hires did not follow the same path is inexplicable in any light other than racial. If Mr. Floyd is indeed aware of the results, it would only be with a sad familiarity of the reality.

The bottom line is, as always, the bottom line. The unemployment picture is artificial and temporary; numbers are the product of unprecedented factors that are likely to change overnight. Even with the most generous of readings, the nation’s unemployment is at post-Depression record levels, with little reason to know that they’ll improve any time soon. The hiring to date is tenuous, lower wage and sadly confirming of the racial inequality that we grapple with today; the idea of a celebration is not only premature but almost intentionally ignorant of the national trauma.

Just to Make Things Worse…

Worst of all, the mood in Congress on the superficially good news is completely misguided. Several Conservative voices sounded out immediately, demanding that the economy’s “success” be met with an end to governmental involvement, and a rejection of the stimulus package presently being debated. A part of the false logic being given is the totally irrelevant recovery of the stock market to near-record levels (Please see “The Battle of Wall Street vs Main Street” to understand) to excuse the removal of support just as the country reaches its most critical and fragile moment. This is an act that could easily tip the scales tragically; and as before, in a way disproportionately slanted against those most in need.

A tone-deaf celebration of impossibly bad circumstances. A response to those misleading numbers by removing the support that is intended to bridge the transition to true recovery. A confirmation of the inherent unfairness built into the economy, and a government that is as blind to that unfairness as any institution being protested today.

We need to understand the truth, and to make that understanding loud and clear. Propaganda and magic thinking will be too painful to too many for us to allow it to be the loudest sounds that we hear.