Last week, there was one piece of good news: an unexpected drop in America’s unemployment rate. Economists expected the figure for May to be even higher than the one for April (14.7%) but instead it fell to 13.3%. The economy gained 2.5 million jobs — a monthly record.
This revived hopes of a V-shaped recovery — i.e. one where the upswing is as rapid as the downswing. A delighted Donald Trump claimed that “This is better than a V. This is a rocket ship!”
A graph published by the business channel CNBC added to that impression. It shows month-on-month job losses and gains since 2015. In April, 20.7 million jobs were lost. That’s an unprecedented number — one that, by comparison, reduces the up-and-downs of the previous five years to a flat line (until, that is, it plunges downwards between March and April). Now, with the May figures, the precipitous drop has soared back up again — giving an extreme V-shaped impression.
The eagle-eyed among you will have spotted that 2.5 million jobs gained in May is a very partial compensation for the 20.7 million lost in April. A graph of the employment level itself (rather than monthly change in the employment level) would not be V-shaped at all — it would show employment falling off a cliff, and then rebounding slightly.
We don’t know for sure that unemployment has bottomed-out. But even if it has, the improvements we’ll see in the months ahead may be hiding more bad news. The easing of lockdown will allow some businesses to come back fast (hairdressers, for example). But for others, like airlines, it won’t be so easy. Therefore, the recovery of overall employment could conceal rises in long-term unemployment in the worst affected parts of the economy.
This same effect can be seen elsewhere. For instance, the CNBC article has a graph based on data from Apple Maps. Between March and April requests for travel directions plunged by more than 50% on pre-pandemic levels — testament to the impact of lockdown on mobility. But since then, there’s been a recovery. Among car-users, the level is almost back to normal. However, among transit users it’s still way down. Public transport is fragile to Covid in a way that the private car isn’t.
It’s a reminder that while some parts of the economy have been bruised by the crisis, others have been broken. Progress made by the walking wounded will send the aggregate stats in the right direction, but that doesn’t mean that lasting damage hasn’t been done. Indeed, the process of economic triage — of deciding what to save and what not to save — is only just beginning.