What happened? American workers are suddenly going back on the job; at least 2.5 million of them, according to the Labor Department. That knocks down the number of unemployed to maybe 20 million, and surprised economists.
A private payroll survey (ADP) that precedes the government’s had said on Thursday their estimate of -2.8 million jobs lost had caused them to lower their guess for the official BLS number (on Friday) to the -4 million to -5 million range, versus an earlier forecast of -8 million.
“These improvements in the labor market reflected a limited resumption of economic activity that had been curtailed in March and April due to the coronavirus (COVID-19) pandemic and efforts to contain it,” said the Bureau of Labor Statistics (BLS). “In May, employment rose sharply in leisure and hospitality, construction, education and health services, and retail trade. By contrast, employment in government continued to decline sharply.”
In fact, American businesses have been going back to work for more than one month, especially in the airline, automobile, leisure and hospitality industries, per the BLS.
American Airlines said Thursday that it expects to fly in July about 55 percent of the domestic capacity that was flown during July 2019, as load factor improved 55 percent at the end of May from 15 percent for the month of April.
“We’re seeing a slow but steady rise in domestic demand,” said Vasu Raja, senior vice president of network strategy. “After a careful review of data, we’ve built a July schedule to match.”
Airline travel has picked up substantially, in other words. On Wednesday, the International Air Transport Association (IATA) said daily flights increased by 30 percent between April 21 and May 27. The IATA said the improvement in the data suggests “the industry has seen the bottom of the crisis, provided there is no recurrence.”
And tens of thousands of autoworkers started streaming back into car and truck plants across the South and Midwest in May, “a critical step toward bringing the nation’s largest manufacturing industry back to life,” according to the NYTimes.
Ford, General Motors, and Fiat Chrysler restarted, after Toyota, Honda and Tesla began reopening plants. Hyundai restarted a plant in Alabama on May 4, according to the NYTimes.
The manufacturing sector lost 1.32 million jobs in April, but gained 225,000 jobs back in May. The so-called underemployment rate that includes part timers and those who have stopped looking for a job recently fell to 21.2 percent from 22.8 percent in April. But it was just 7 percent in February, so the latest payroll numbers are nothing to crow about.
Cities such as Detroit have also announced that hundreds of its employees are returning to work. Detroit Mayor Mike Duggan revealed to Detroit Regional Chamber President and CEO Sandy K. Baruah that the city is preparing “to send hundreds back to work in areas like cutting grass, road work, and construction.”
The DOW Jones is up more than 900 at this writing, and S&P 500 up more than 90 points on the surprise news. It looks like many companies called back their workers at the earliest opportunity with either emails or texts after two months of layoffs, thus escaping the notice of statisticians.
Is this improvement just a blip, as COVID-19 infection rates continue to climb in most of the country? We have to assume this will continue as more of the economy opens this summer, and demonstrations against police brutality continue.
Any real improvements will also depend on how returning workers are treated at their job places. Will they follow CDC guidelines of workers safety with appropriate disinfection protocols, including the continued wearing of masks and social-distancing?
Today’s financial market euphoria smacks of an irrational exuberance based in the belief that further disruptions due to the pandemic and street protests will die down.
Harlan Green © 2020
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