Labor statistics give hope for swift recovery
So far, 2020 has been a banner year for bad news, which is why it was refreshing on Friday, to hear some positive news – even if you have to put an * by it.
The Federal Bureau of Labor Statistics (BLS) released the monthly jobs report, showing a growth of 2.5 million jobs in the country in May. This was in direct contrast to the expected continued job losses many economists had forecast, as the country and world continues to deal with the ongoing COVID-19 pandemic.
The * comes in, because the BLS, in a show of transparency, noted it likely misclassified a number of unemployed people as temporarily unable to work, rather than laid off. This means the national unemployment rate for May, was likely closer to 16 percent, than it was to the 13 percent listed in the last week’s report.
The BLS staff says the same misclassification occurred in April, which would mean the national jobless rate was actually closer to 20 percent at the peak of when most state economies were restricted to “essential” workers.
In normal situations, a 16 percent unemployment rate would not be anything to celebrate. However, these are far from “normal” times and a 3 percent drop in unemployment claims is much-needed good news, that shows the economy is far more resilient than originally projected.
Doomsaying economists had predicted May’s unemployment rate would be higher than that of April, and painted a scenario of a free-falling economy, because of the global pandemic. While the economic picture has been bleak in many areas, especially in more urban population centers, rural Wisconsin avoided much of that economic pain.
Wisconsin’s jobless rates for April, were at about half of the adjusted national average.
The broader question for economists and business owners as they try to navigate the turmoil of 2020, is how to effectively gauge the health of the economy. Traditionally, many have turned to the unemployment rate as a key indicator, largely because it can be reported on in near realtime with the rise and fall of claims recorded each week.
The unemployment rate is considered a lagging indicator of recessions, because employers are slow to lay off staff and even slower to hire new workers back during a period of recovery.
The COVID-19 economic models more closely resemble a toddler playing with a light switch, as things go from on, to off, to back on again. At the same time, there is a pent up demand for goods and services, as consumers have been unable to make purchases, because of store closures and supply chain disruptions.
This will in turn impact other key statistics like the gross domestic product and the gross national product – things that will get heavy play as elections draw closer.
Just as generals often are accused of “fighting the last war,” rather than preparing for the next one, economists and financial policy makers risk making the same sort of blunders, in assuming the current situation operates by the same classical rules as previous economic downturns. Fortunately, the federal government moved quickly in putting the bi-partisan CARES Act programs in place to help with employee retention, and assist states and businesses.
The COVID-19 pandemic has had a significant shortterm economic impact, from the global to the local level. What the long-term impact will be remains uncertain.
The job growth numbers released last week, give hope for a quick bounce-back, when the economy fully reopens.
Members of the Courier Sentinel editorial board include publisher Carol O’Leary, general manager Kris O’Leary and Star News editor Brian Wilson.