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Covid and the Labor Force


The “jobs report” issued by the Bureau of Labor Standards has always been the most watched economic report each month and has often moved the stock market, sometimes violently.  Naturally, I have monitored it closely for decades now, during both booms and busts.  However, Covid-19 has shattered both the labor force and the study of labor economics.  I have never seen the labor force so convulsed, with such contradictory data.

First, here is the basic report:  The good news is that the unemployment rate dropped to 6.3%.  Economists expected 50 thousand jobs were created in January, and it turned out that 49 thousand were created.  Such precision is rare.  The bad news is that 170 thousand fewer jobs were produced in the last two months than expected.  So much for precision “jobs reports.”

Second, the only reason the unemployment rate dropped is that the workforce is smaller.  Over the last year, 4.3 million workers have given up and left the workforce.  When people are not looking for a job, they are not unemployed and therefore not included in the unemployment rate.  Even after the 4.3 million workers have given up, there are still 9.9 million who want to return to the workforce.  Creating 49 thousand jobs a month is obviously not enough.

Third, the financial crisis of 2008/9 was often called the “mancession” as unemployment was concentrated among males.  Covid has produced a “girlcession” as unemployment is concentrated among females.  Covid ended in-school attendance for kids, and mothers carry a heavier burden for caregiving.  There are also a disproportionate number of women in leisure and hospitality, which lost 61 thousand jobs last month, and retail, which lost 38 thousand.

Fourth, there is reason for sunshine.  Warmer weather should weaken the virus.  Plus, a “stimulus/rescue” package of $1.9 TRILLION  will certainly not hurt the economy this year.  Plus, corporate earnings have remained surprisingly strong.  Lastly, one of the most tried & true rules on Wall Street is . . . “don’t fight the Fed.”  The Federal Reserve is more than accommodative and is pushing enough money into the economy to prevent either an economic or financial collapse.

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