JOB NUMBERS | May Unemployment 13.3% (16.3%?)

June 5, 2020—Total nonfarm payroll employment rose 2.5 million in May, and the unemployment rate declined to 13.3 percent, the U.S. Bureau of Labor Statistics reported this morning.

However, the BLS includes a note by BLS Commissioner Beach noting that some misclassification occurred, making the unemployment number as reported 3 percentage points lower than it would otherwise have been:

If the workers who were recorded as employed but absent from work due to "other reasons" (over and above the number absent for other reasons in a typical May) had been classified as unemployed on temporary layoff, the overall unemployment rate would have been about 3 percentage points higher than reported (on a not seasonally adjusted basis). Additional information is available online at www.bls.gov/cps/employment-situation-covid19-faq-may-2020.pdf.

(June 6 —See WaPo story, 11 am.)

The principal unemployment rate (U-3) is lower than many economists expected. The BLS warned in a May correction that because its survey is a sample of households during a specific period, unemployment claims data will not necessarily match up to the unemployment numbers. However, the BLS also reports different unemployment rates using a range of definitions.  U-6 is the broadest definition, taking into account those marginally attached to the labor force, including total employed part time for economic reasons. This rate was 20.7 percent, more in line with economists' expectations.

Forecasts had been for as high as 25 percent. The unemployment rate was 25 percent (or a smidgeon above) at its peak in the Great Depression. This rate occurred in the early months of 1933. Most economic observers dismiss the idea that we are in a Depression, because they expect the economy to recover quickly as soon as coronavirus cases level off or a vaccine is developed that would allow the public to resume a normal life.

But the following are examples of people who have gone on record as fearing that the May 2020 unemployment number announced this morning could be as high as 25 percent:

• Fed Chairman Jay Powell.
• Treasury Secretary Steve Mnuchin.
• Goldman Sachs.
• Forbes Magazine's Chuck Jones.

One of the backdrops to this was a 48 percent increase in bankruptcies in May.

Consensus: 20 percent. Most commentators, if they gave a projected unemployment number, were close to CNN's Anneken Tappe, who thought the rate will be most likely about 20 percent. Which is bad enough, and off the April chart.

To understand what is happening, behind the unemployment number itself, look at U-6 as well as U-3. U-6 is 20.7 percent. It includes people who are not in the unemployment numbers because they are marginally attached to the labor force or are employed part time for economic reasons.

Measure	Apr.   2019	Feb. 2020	Mar. 2020	Apr. 2020	May 2020
U-3 Total unemployed, as a percent of the civilian labor force (official unemployment rate)	3.6	3.5	4.4	14.7	13.3
U-6 Total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force	7.3	7.0	8.7	22.8	20.7

The number that is ordinarily reported is U-3. In 1933, that was the only number available. But U-6 provides details (insofar as any sample of 50,000 households in the U.S. economy can provide details) of people who are neither employed nor unemployed, an interesting group of potential workers.

The level of U-6 unemployment is important to look at because of the number of Americans who are on the Payroll Protection Plan and other special programs that are keeping workers off the unemployment rolls.

(Hat tip to Dr. Jurgen Brauer, Geoffrey Hilton and Dr. Farid Heydarpour for their assistance with this post!)

MAY UNEMPLOYMENT ESTIMATES | 20-25%

U.S. Unemployment Rate, 2010-2020. The May figure was predicted to be
off the chart. [P.S. The BLS actually reports it defined to 13.3 percent.]

Thursday, June 4, 2020—Forecasters like to say: "If you give a number, don't give a date. If you give a date, don't give a number." Especially, don't forecast a definite number the day before.

However, these rules have been broken recently by people who have strong views about what the U.S. unemployment number will be at 8:30 a.m. tomorrow.

Scariest number: 25 percent. The unemployment rate of 25 percent is scary, because that (or a smidgeon above) was the peak unemployment of the Great Depression. This rate occurred in the early months of 1933. That would meet one test for deciding whether we are in the Second Great Recession or the Second Great Depression. The economy (GDP) has already suffered two quarters of decline. The big question is whether the decline will continue, which would be likely if the country saw a second wave of coronavirus infections. Paul Krugman has argued that to call what we are in a Depression would require four quarters of decline.

Most economic observers dismiss the idea that we are in a Depression, because they expect the economy to recover quickly as soon as coronavirus cases level off or a vaccine is developed that would allow the public to resume a normal life.

The following are examples of people who have gone on record as fearing that the May 2020 unemployment number to be announced in the morning will be as high as 25 percent:

• Fed Chairman Jay Powell (and it's his job to be well informed on the topic).
• Treasury Secretary Steve Mnuchin.
• Goldman Sachs.
• Forbes Magazine's Chuck Jones.

Consensus: 20 percent. Most commentators, if they give a projected unemployment number, are like CNN's Anneken Tappe, who thinks the rate will be most likely about 20 percent. Which is bad enough, and off the chart above. We will know soon enough.

To understand what is happening, behind the unemployment number itself, I recommend looking at U-6 as well as U-3.

Measure	Apr. 2019	Feb. 2020	Mar. 2020	Apr. 2020	May 2020
U-3 Total unemployed, as a percent of the civilian labor force (official unemployment rate)	3.6	3.5	4.4	14.7	20%? 25%?
U-6 Total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force	7.3	7.0	8.7	22.8	25%? 30%?

The number that is ordinarily reported is U-3. In 1933, that was the only number available. But U-6 provides details (insofar as any sample of 50,000 households in the U.S. economy can provide details) of people who are neither employed nor unemployed, an interesting group of potential workers.

The level of U-6 unemployment will bear careful watching because of the number of Americans who are on the Payroll Protection Plan and other special programs that obscure the data.

(Hat tip to Dr. Jurgen Brauer, Geoffrey Hilton and Dr. Farid Heydarpour for their assistance with this post.) 

TECH JOBS | Is Tech an Ally or Threat to Wall Street? (A Dialogue)

Tech Jobs vs. Wall Street Jobs (The American Banker, One Year Ago, March 16, 2017)

One year ago the American Banker displayed the chart at left, suggesting that tech jobs were in competition with many Wall Street jobs.  

Greg David recently in his Crain's blog expressed appreciation for the growth of tech jobs in New York City, as a diversification of highly paid employment within NYC. 

The following unedited (except for formatting) dialogue on this topic between Edward Greenberg, an attorney in New York City, and me were posted as comments on the Crain's blog and are re-posted here by permission of Mr. Greenberg. 

An underlying question is whether tech jobs are substitutes for Wall Street jobs, as indicated in the chart above, or are complementary.

Will more use of technology in the financial sector

• Strengthen Wall Street? 
• Hollow out its employment base?
• Permit financial jobs to migrate to other cities?

Edward C. Greenberg 
Response to Greg David, March 1, 2018

Very nice news but for context – there are 80,000 (2/3 of NYC's) such "defined" jobs in Los Angeles, a city with less than 1/2 the population of NYC. The population of the LA metro area is 13.5 million and NYC's is 20.3 million.

LA is not considered a "tech hub" like Northern Ca or even Boston. So while the number of tech jobs in NYC sounds like, and is in fact, good news, it is being employed by our politicos for their own PR purposes. By NOT comparing these figures to other major cities the figures become distorted and not indicative of anything that our politicos can take credit for.

Forbes does not list NYC in its top 10 cities for tech job growth. It does list cities like San Diego, Raleigh, Nashville (metro area) and Jacksonville, FL (where there has been a 72.4% increase in tech jobs from 2001 to 2017.

Every new job in NYC is good news but other cities are doing better in attracting these type businesses and jobs. If NYC "rests on its fake laurels" it will continue to fall behind other cities in attracting these jobs.

The author is spot on regarding the amorphous "definitions" employed to define tech sector and "eco-system" jobs. A coffee shop across the street from Google HQ which serves Google employees is clearly part of the tech "eco-system".

John Tepper Marlin
Response to Edward C. Greenberg, March 1, 2018.

I agree that understanding the significance of the tech sector in New York City requires comparing New York with other cities. The New York City Comptroller's Office did this in 1999, just before the way the job numbers are aggregated was changed.

In addition, the idea that Wall Street should be pitted against the tech sector as a source of jobs misses a big part of the story, which is Wall Street's need for tech support and tech's dependence on Wall Street

An MIT Professor solemnly told me 20 years ago that New York City could never catch up with Boston as a source of startups servicing financial institutions. MIT was developing “aggregators” that would, he said, soon be collecting financial information from individuals and assembling them in one place, across platforms. That process is taking longer than he predicted.

Meanwhile, New York City financial technology jobs have been growing because Wall Street wants these vendors close by. Those high-frequency traders have to be nanoseconds from their platforms.

Wall Street and NYC tech workers stand or fall together. NYC's preeminence in the financial world of the next decade depends on both.

The 1999 NYC Comptroller's report on the growth of tech jobs noted the difference between counting tech occupations and tech-oriented companies. The data-counting problems are too great to opt for one or the other. The problem is with the aggregation process. We depend on the BLS for data, and the BLS makes it hard to count payroll local jobs by claiming that disclosing information would allow researchers to get down to the company level and discover proprietary information.

It is sad for that reason that BLS moved many research functions out of New York City to Boston (and Philadelphia). NYC's 1911 Triangle Fire gave rise to the Labor Department and New York City was one of the earliest research centers on job data. Senator Ted Kennedy was reportedly active in promoting the move of BLS staff positions moved from New York to Boston.

A good understanding of how financial and technology jobs interface is important to New York City. It is also important to the country. We need more and better research on what is happening to jobs in the intersection between finance and technology.

Edward C. Greenberg 
Response to John Tepper Marlin, March 1, 2018


Agreed – with one key addition.


Lots of traditional Wall St, banking and financial service jobs moved from NYC to NJ, FL, S. Dakota and Utah. The concept of "geographic proximity" is rapidly becoming an anachronism. The notion that an NYC company would have "back office personnel" 500-1,500 miles from Gotham was unthinkable 25 years ago. Today it is the norm.

The Internet did not come into meaningful public use until the 1980's; computer driven trading came in about the same time. Pick up a WSJ, NYT, Forbes, Fortune or The Economist from the era. Try to find one that remotely predicts the manners of business and locations of major insurers, banks and stock trading which would exist in 2018.

Geography as a factor will soon be entirely irrelevant. Gothamites still don't believe the number of companies and jobs in these sectors moving to or already located in FL, TX and various other flyover states most of which New Yorkers have never set foot in. Did your buddy use the term "near shoring" in 1999? Betcha a beer he didn't.

John Tepper Marlin 
Response to Edward C. Greenberg, March 7, 2018

Yes, geography is less relevant than it used to be. But no, geography will never be irrelevant, even to technology. The way in which it is relevant is changing.

One of the strengths of the United States is that we have many strong population centers that are highly interconnected. New York City's greatest strength has been its ability to lead the country in finance and communications. This in turn pulled in many corporate HQs.


Financial institutions have always used every means of communication they could. Before the telegraph, they used carrier pigeons as well as horseback couriers.


Today, I'm not in New York City (I'm away from the nasty Northeastern weather) but I feel as much in touch as if I owned a huge flock of carrier pigeons or a large staff of messengers operating on routes dotted by inns with stables.


I still rely heavily on face-to-face meetings – especially when it comes to meeting new people. Personal contact may actually be more likely to mislead than seeing what someone writes, but some part of us wants to see people talk.


What is changing since 1999 is that many businesses have learned how to reduce the need for continuous face-to-face contact. Work at home, control from a remote location, and conference calling are all functioning more widely and reliably than they first did.


The natural duopoly of newspapers and bankers, and their centralization in financial centers (my great-grandfather edited Holland's then-greatest newspaper in Amsterdam, founded on family links among bankers and newspapers), survived the introduction of the telegraph and the radio. It has also survived the creation of the Internet.


We have seen recent stories about Silicon Valley's entrepreneurs seeking new locations because of high costs and inefficiencies, and the growth of new tech centers in the Midwest.


This decentralization is a good thing for the United States, even if it creates challenges for New York City. Instant reporting and high-frequency and program-driven trading is vulnerable to cyber-malfunctions, accidents or cyberattacks. After 9/11, companies built huge physical back-office locations in readiness for a need to move. It made sense to decentralize.

Geography is still relevant because cyberspace still depends on interruptible physical computers and power generation.

Edward C. Greenberg 
Response to John Tepper Marlin, March 7, 2018

You make some excellent points but if history teaches us anything it is that centers of power and commerce change for good or ill and many become irrelevant or disappear entirely.

Nobody predicted the Detroit of 2008 in 1960 or 1970. The notion that Pittsburgh would not be a steel producer by the late 20th century was predicted by no one in the years after the war. There was no mention of the Internet in any business or general circulation publication in 1960. Buffalo and Newark have 1/2 the populations today that they had in 1960. Who predicted 30 years ago that Jacksonville, Fl, Utah, S. Dakota and other places would be centers of banking, finance, insurance and credit transactions?

The ten most populous American Cities in 1960 were:

1 New York, New York 7,781,984.
2 Chicago, Illinois 3,550,404.
3 Los Angeles, California 2,479,015.
4 Philadelphia, Pennsylvania 2,002,512.
5 Detroit, Michigan 1,670,144.
6 Houston, Texas 938,219.
7 Baltimore, Maryland 929,024.
8 Cleveland, Ohio 876,050.
9 Washington, District of Columbia 783,956.
10 St. Louis 750,000.

Nobody predicted that by 2010 the above list would morph into:
1 New York City, New York 8,175,133.
2 Los Angeles, California 3,792,621.
3 Chicago, Illinois 2,695,598.
4 Houston, Texas 2,099,451.
5 Philadelphia, Pennsylvania 1,526,006.
6 Phoenix, Arizona 1,445,632.
7 San Antonio, Texas 1,327,407.
8 San Diego, California 1,307,402.
9 Dallas, Texas 1,197,816.
10 San Jose, California 945,942.

Cleveland, Baltimore, Detroit, St. Louis “disappeared". Jacksonville, Fl had a population of 201,000 in 1960 and 907,000 in 2017. Not even the town fathers saw that coming and as a result the city has been on a years-long road building project to handle the daily commuters.

Predictions of future development of population movements and industries in the US have been historically wrong. No expert, urban planner, or politician foresaw the dominance of e commerce, the existence of Facebook, Apple, Amazon or the abundance of indigenous oil/natural gas during the gas crisis of the 1970s. The Dec. 3, 1973, cover of Time Magazine, "The Big Freeze", featured a lengthy scientific article about the earth's temperature decreasing and the coming of a new ice age. This expert prediction came before the catalytic converter was required for autos, which were spewing exhaust 5 times dirtier than current cars which burn cleaner fuels. Trucks were then burning dirty diesel, and there was extensive burning of coal to generate electricity.

What odds do you think you would have received by making a bet in 1970 that in 2018, the fastest-growing states in America would be in order: Idaho, NV, Utah, Washington, FL, AZ, TX, CO, Oregon and S. Carolina (10th). Six of those states are clearly not in the sunbelt.

So, I understand your well-made points but society and business moves so fast in the 21st century that the day when geography plays little to no role in most (not all) business is already upon us. One need only visit or do business with companies in places like Miami, San Diego any major TX city and a few dozen others to see how fast NYC is becoming old by comparison. If NYC's mass transit system continues to disintegrate and employ equipment nearly 100 years old, businesses and residents will accelerate the on going trend to depart. Daily 2-hour commutes have become unnecessary and unacceptable to workers, entrepreneurs and others who have options to avoid the cost and misery of driving, buses, trains and/or subways.

The number of businesses, artisans and professionals who have left NYC and have benefited economically stands as daily proof that while in the real estate business location is everything, in the business and artistic worlds.... not so much anymore.