Adding texture to the jobs report

The monthly jobs report shows a widely-cited spike in unemployment, starting in April 2020, as a result of the COVID-19 pandemic. It’s worth illustrating that employment effects go far beyond what is measured by unemployment, and additional analysis of household survey data give a more complete picture. The large number of people affected support a case for broad eligibility for government financial support.

Overview

The age 16 or older population can be divided into three categories: those who are employed in any amount, those who are not employed but are on temporary layoff or are looking for work (the unemployed), and those who are out of the labor force. The out of the labor force group includes students, caregivers, persons with disabilities, and the elderly, as well as those who have given up looking for work but would like a job.

Screenshot from 2020-08-16 20-44-39

Because the three categories in the chart above sum to 100% in any give month, a change in one category must be offset by a change in another category. For example, during a recession (shaded gray area) the employed share of the population falls as people become unemployed and leave the labor force.During the great recession in 2008-09 the job losses were protracted. From October 2006 to October 2007, the employed share of the age 16+ population fell by 0.6 percentage point. From October 2007 to October 2008, the employed share fell by 1.0 percentage point, and from October 2008 to October 2009 it fell by another 3.2 percentage points. In contrast, the 2020 recession started very abruptly. The March report covered the week before many places had shut down, but the April 2020 report showed a 9.3 percentage point drop in the employed share of the age 16+ population from April 2019. Each subsequent month, with the most recent available being July, showed a smaller one-year rate of change than the previous month.Screenshot from 2020-08-16 20-45-00To get a bigger sample size and an overview of the April 2020 onward data, the following sections combine the monthly survey data for April through July 2020 and compare it to the corresponding combined survey data covering April to July 2019. The average decrease in the employed share of those 16 or older was 7.2 percentage points, with three-quarters of that shift moving into unemployment (a 5.2 percentage point one-year change) and one-quarter leaving the labor force (2.0 percentage point one-year change).Screenshot from 2020-08-16 20-45-21

Overall Change by Age

Data show the effects in labor force status are disproportionate to young people. Among three-year age groups used for these calculations, the age 19-21 group was the hardest hit, with a decrease in the age group employment rate of 16.8 percentage points in April through July 2020 compared to the same four months the previous year. The age 19-21 group was also disproportionately likely to leave the labor force, with a 7.2 percentage point one-year change in the share of the population that is not in the labor force, compared to a 9.6 percentage point change in the share that is unemployed. The effect was similar but less pronounced for those ages 16-18, 22-24, and 25-27.Screenshot from 2020-08-16 20-45-34Next we look at changes within each of the three categories discussed above.

Changes within types of employment

Shifts within the employment category are important. For example, some full-time workers have their hours cut but are still employed, and some people lose a second job. Additionally, the Bureau of Labor Statistics reported that some people who should probably should have been classified as unemployed were instead described as “employed, but not at work” in the data, particularly in April 2020. In these three examples the person is classified as employed and wouldn’t show up in the previous chart.Therefore, the next chart divides those who are employed into four nonoverlapping categories: multiple jobholders (people who have more than one job), those fully-employed (defined as working 35 or more hours or voluntarily working fewer) and at work during the reference week, those working fewer than 35 hours but who want more hours (part-time for economic reasons), and those who are employed but not at work. The one-year change in each category shows that the employment effect is substantially larger when considering the deterioration within employment categories.Most age groups saw a decrease in the “fully-employed, at work” category that was larger than the overall change in employed defined in the previous sections. This is because of the reduction in second and third jobs, the increase in people not at work, and the shift of millions of people to part-time status, despite their preference for full-time work. The reduction in multiple jobholding rates was highest among those age 22-24 (1.9 percentage point decrease). The age 49-51 group had the biggest increase in the share of the age group that works part-time but wants to work full-time, with a 3.4 percentage point increase.Screenshot from 2020-08-16 21-45-08

Changes in Unemployment by Age

A bright spot in the four months of historically bad data is that most of the unemployed are on layoff. Unlike other recent recessions, the reduction in economic activity was a decision made for public health purposes. Arguably, the US did not do enough or move quickly enough in reducing employment and non-essential economic activity, causing the country to have many more cases and preventable deaths than western Europe.It is tough to know whether a job loss will actually be temporary, but the expectation during the early months of the shutdown was that people stay home and that policymakers provide enough income to keep most families financially stable without them going out and looking for work. The data show that people very disproportionately did report their unemployment as a layoff. That said, there was still an increase in the share of the age 16+ population that is actively looking for work. Those in their 20s are disproportionately likely to be looking for work rather than on temporary layoff, with the peak being for those 22-24, who have an increase of 1.8 percentage points in 2020 from the previous year rate of looking for work.Screenshot from 2020-08-16 20-46-05

Changes in Labor Force Participation by Age

Perhaps the most interesting chart, and the reason I initially looked into the topic, shows changes in categories of labor force non-participation (those out of the labor force). The source for this data asks people about their major activities and their reasons for not having a job and not looking for one. Those 16 or older can be out of the labor force because of school, a disability or illness, to care for home or others, because of retirement, or they can be discouraged because they do not believe work is available for them.The data show a mixture of effects, with the most prominent being an increase in the share who are discouraged. Some other effects are more age-specific. Young people are increasingly reporting school enrollment as their reason for non-participation, but also are disproportionately increasingly non-participants in the discouraged and other categories. There were also people age 22-45 who left caregiving roles, ostensibly to work or look for work. Additionally, the retired share of those 55 and older increased.Screenshot from 2020-08-16 20-46-23It’s worth noting here that age groups can partially offset each other in these data. For example, a portion of young people in college who would prefer to work are offset by people in their 20s and 30s who would go to school if they felt confident about leaving a job.Among those age 34 or older, there is actually a decrease in the share that report disability or illness as their reason for non-participation. It’s not clear what is happening here, though one possibility is that reductions in non-COVID-related medical procedures mean fewer people were sidelined temporarily by a surgery. Another possibility is that some portion of those who reported disability or illness found work or moved into other categories of non-participation or unemployment.

Summing up the categories

Far more people have labor market effects from the shutdown than those counted as unemployed. The unemployed average 19.5 million over the four month period and BLS reports 16.3 million unemployed in July. However, counting the people who are no longer fully employed plus those who are no longer multiple jobholders yields a total of 26.8 million people on average for the four month period.Screenshot from 2020-08-17 00-39-43The data also show that those age 16 to 24 are disproportionately affected. The last table includes only those in this combined age group. About one in seven in this group, about five million people, fell out of the fully employed category or the multiple jobholder category. About half of those are unemployed and the other half are underutilized or left the labor force.Screenshot from 2020-08-17 00-46-43

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s