Historic Evaporation of Jobs and Self-Employment

By at 8 May, 2020, 12:58 pm

by Raymond J. Keating-

U.S. jobs evaporated during the month of April, according to the latest report from the U.S. Bureau of Labor Statistics. In addition, self-employment took a major hit.

Let’s consider some key points from the report:

● According to the establishment survey, nonfarm payroll employment declined by 20.5 million in April, after dropping by 870,000 in March. The April decline was the largest one-month drop in the history of this dataset going back to 1939.

● Nonfarm payroll employment in April stood at its lowest level since February 2011.

● As for the household survey, unemployment increased by 15.9 million in April, after increasing by 1.35 million in March. The unemployment rate hit 14.7 percent in April, which was the highest rate in this dataset going back to 1948.

● In April, the labor force fell by 6.43 million, after declining by 1.63 million in March.

● The labor force participation rate fell from 63.4 percent in February to 62.7 percent in March, and 60.2 percent in April. The April level was the lowest since January 1973.

● Employment, once again in the household survey, dropped by 22.4 million in April, after a decline of 2.99 million in March.

● The employment-population ratio plummeted from 61.1 percent in February to 60 percent in March, and then to 51.3 percent in April. The April level was the lowest recorded in a dataset going back to 1948. (See the following chart.)

Source: Federal Reserve Bank of St. Louis, FRED

The grim labor force and employment numbers make clear that the jobs picture actually is far worse than the 14.7 percent unemployment rate would indicate.

Meanwhile, small business activity as measured by self-employment data showed an overall distressing trend. In particular, seasonally-adjusted data on unincorporated self-employed showed a drop from 9.542 million in February to 9.478 million in March, and then falling to 8.245 million in April. That is the lowest level since January 1980. So, over the last two months, the number of self-employed declined by 1.3 million. Interestingly, incorporated self-employed (not seasonally adjusted), at least through March and April, managed to hold its ground (that could reflect that, unlike unincorporated businesses, incorporated businesses do not disappear in short time).

The coronavirus pandemic and the resulting government shutdowns have resulted in the historic evaporation of tens of millions of jobs and millions of businesses.

Getting America back to work once the coronavirus becomes manageable will require getting policymaking realigned in a far more pro-entrepreneurship, pro-investment direction, including, as mentioned in previous analyses, substantial and permanent tax and regulatory relief, reining in the size of government, and aggressively moving in a free trade direction.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.



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