20.5 million jobs lost understates and overstates the problem: Economist
A record 20.5 million jobs were cut in the month of April. KPMG Chief Economist Constance Hunter joins Yahoo Finance’s On The Move to weigh in on the dire unemployment numbers.
Video Transcript
- So we got the dire headlines today that did confirm what we already know about the jobs market in the US. It is dire. We are seeing a decline of 20 and a half million jobs in the month of April, the unemployment rate rising to 14.7%. And this confirms what we know, at least partially, because we've been watching the jobless claims numbers over the last several weeks.
All of that said, stocks are rising today. There is hope on the part of some investors that this is the worst it's going to get. That remains to be seen, but the S&P 500 up by 1.4% right now. The Dow is up 1.5%, the NASDAQ also up about 1.5%. I'll be joined over the next hour by my co-host, Adam Shapiro, as well as Dan Roberts and Rick Newman.
Right now, I want to dig into those jobs numbers a little bit more. Constance Hunter is with us from New York. She is the chief economist at KPMG, and she frequently joins us to help us make sense of jobs numbers. This has become an increasingly difficult task, obviously, Constance. And you said about this number that it both overstates and understates. What do you mean by that? How does it do each?
CONSTANCE HUNTER: Yeah, it's a very unique report in the magnitude, but there are some quirks with regard to the reference week, with regard to how people are classified. So the 20.5 million number, as terrible as it is, actually understates the number of people who are unemployed. So there are people who were classified as absent from work but not unemployed who probably should be counted as unemployed. There are other quirks with regard to the reference week. So realistically, we should have closer to 30 million unemployed from this time period. We expect to see that trickle in in May.
And then it overstates the problem in the sense that over 75% of the 20.5 million are actually temporarily unemployed, meaning that their employers intend to call them back to work when economic conditions are such that their businesses can support more employees. So it's a little difficult to interpret, and really requires all of us economists digging under the hood. There are a lot of footnotes and subnotes that the BLS has put out to help explain things that are going on in this report, and it's really important to read through all those details to fully interpret what's happening.
- Constance, that figure you mentioned of those who would expect to be recalled back to work as things improve, I think the figure was 18 million. But how realistic is it to expect those 18 million will come back quickly? I mean, look, 25% capacity at a restaurant does not bring everyone back.
CONSTANCE HUNTER: You know, Adam, you have hit the nail on the head. That is exactly the question, and what makes us so fearful that this is going to be a long, slow climb back. In addition to the fact that 25% capacity doesn't support workers coming back, what we've also seen is a number of firms not having the capacity to make it to the other side, and shutting their doors.
Many of these firms are in the retail and leisure and hospitality space. And so those jobs are never coming back with those particular employers. We think it's going to be several quarters until we start seeing meaningful jobs gains, and well into the end of '21, beginning of 2022 before we get back to previous employment levels.
RICK NEWMAN: Hey, Constance. Rick Newman here. Part of the tension in all this is it's like a race against time for some of these businesses to see how long-- you know, can they hang on long enough for the economy to reopen and people to start spending money again, and some of those people go back to work. What are the sort of triggers you're looking for, signals that either, yes, the businesses are coming back, or no, they may not make it to the other side?
CONSTANCE HUNTER: Yeah, that's a really important question. And obviously, as we know, a lot of this economic data comes in with lags. It's released, even this, for the previous month. So we're looking at a lot of real-time data, so things like foot traffic, internet traffic. We're scrubbing some data with regard to shipping traffic and information, and just trying to glean as much as we can from real-time data sources. Another great source is the ADP jobs report, which there was just a paper published with the Federal Reserve that goes into a lot of the data that they're getting on both firms and on the employment situation. So we're broadening our search into different data sources.
RICK NEWMAN: How does that look so far?
CONSTANCE HUNTER: Well, it's what Adam was saying, that a lot of these firms are actually shutting their doors forever. We're starting to look at what's going to happen with the states. There are over 20 million people employed at the state and local level by state and municipal governments. And unless states start to get some assistance, we're going to see another wave of layoffs from those employees, because the states are not going to be able to keep those people employed. And so right now, a lot of those signals look very unfavorable.
We're also looking at other economies to see how they are coming back. So what we see in China in terms of the amount of economic activity that is coming back, it is not surging back, it is coming back very slowly, especially at these impacted businesses, restaurants, retail, leisure and hospitality. Just a very slow climb back.
DAN ROBERTS: Constance, Dan Roberts here. As you mentioned, the employment numbers are probably even worse in reality than the bad numbers we got today. So I want to ask you what you make of the marketplace, and how stocks have behaved in the last few weeks, seeing big gains, especially the NASDAQ. And it looks like kind of regardless of the actual economic data, which is very bad.
CONSTANCE HUNTER: So obviously, the equity market is looking past this. The market I tend to look at for clues about what's happening with the economy tends to be the bond market. So this is both treasuries and the corporate fixed income world. And there we see, I think, a more realistic read of the long-term nature of this. Obviously, the equity market is, in part, being buoyed, as is the fixed income market, by the Federal Reserve purchases and Federal Reserve activity and QE. Let's just keep in mind that $2 trillion of QE within four weeks is an unprecedented amount of money. It vastly increases the amount of QE that was done at the maximum time after the global financial crisis in terms of volume and speed. And this, of course, is feeding through into market liquidity.
- Constance, it's good to see you. Stay well. Thank you so much for your perspective on this jobs report today. It's a tough one to swallow. Constance is the chief economist at KPMG. Thank you.
