Unemployment Surged During Lock-Down

Unemployment was one of the main consequences of the coronavirus lock-down. As people got locked, many jobs were lost, since not all businesses can push the pause button. The unemployment rate surged all over the world, and jobless claims jumped higher. In the US, 701K people were layed off during May, while in April a staggering 20,687K people lost their jobs and that’s only from the non-farm employment sector.

In total, more than 40 million Americans were made redundant in the last few months. The same thing we saw in Canada, with smaller numbers but the same proportion of people losing their jobs. In Canada, more than a million people were made redundant in March and double that amount in April. The unemployment surged to 13% in April in Canada, while in US it surged to 14.7%.

Non-Farm Employment Positive Surprise in May

Predictions from economists were quite gloomy for this period and the coming months. Some of those predictions materialized in the previous two months, but in May the non-farm employment report from the US and the Canadian employment report came out quite positive. Jobs were expected to decline again in May, but 500K in Canada and by 7,750K in the US. These numbers would slow the pace of unemployment, but they are still massive figures, despite us getting used to such figures in the last two months. But, employment reversed and we saw an increase in both US and Canadian employment figures. Below are the short versions of both reports:

US Non-Farm May Employment Report

• Change in Non-farm payroll 2,509K vs -7,500K estimated
• April revised lower to -20,687K vs -20,537K estimated
• Unemployment rate for May 13.3% vs. 19% estimated.
• April unemployment rate stood at 14.7%
• Average weekly hours 34.7 vs. 34.3 estimate
• Average hourly earnings MOM -1.0% vs. +1.0 estimated
• Average hourly earnings YoY 6.7% vs. 8.5% estimated
• Participation rate for May  60.8% vs. 60.1% estimated
• April participation rate 60.2%

Employment is increasing again in US

Canadian May Employment Change

• May employment change +289.6K vs -500K expected
• April employment change -1,993.8K
• May unemployment rate 13.7% vs 15.0% expected (highest on record)
• April unemployment rate 13.0%
• Participation rate 61.4% vs 59.8% expected

As see above, the numbers are pretty good. The US non-farm payrolls increased by 2,509K in May against -7,500K expected and the unemployment rate declined to 13.3% from 14.7% in April, while expectations were for another increase to 19%. Earnings seems to have declined, but that’s due to the Trump cheque worth $600/week for some and $1,200/month for others, on top of unemployment benefits and other income with they might have had and has remained unchanged during the lock-down. Participation rate also increased, which has softened the positive impact of surging jobs on the unemployment rate.

In Canada, employment turned positive as well, increasing by 289.6K against -500.0K expected. Although, the unemployment rate increased by 0.7% to 13.7% from 13.0%, but it beat expectations of 15%. This increase in the unemployment rate when jobs also increased, is explained by the increase in participation rate.

Has the Tide Shifted?

Anyway, the question in everyone’s mind right now is “Has the situation reversed now that he lock-downs are mostly over”? Well, things are not as bad as they were for sure, shown by the employment reports in May, which was mostly another quarantine month. That’s a good sign. But, many business are gone forever, small or medium. So, after some positive months as most people get back to work, we will see the real results of the lock down.

Employees of the business who are closed and some self-employed people will add up and make it difficult to get back to pre-lockdown unemployment rates. Also, the business confidence has declined, as has spending, which will take some time to recover. Add the US protests and destruction during the last week, which is stil ongoing and the future doesn’t seem to promising, especially for business. So, it will be difficult for employment to get back to pre-covid levels.