Washington Insider-- Monday
Complicated Jobs Report Brings Some Relief
Here’s a quick monitor of Washington farm and trade policy issues from DTN’s well-placed observer.
US Ag Trade Data Shows Sector Echoed Broader Trade Data
The value of U.S. ag exports in April dropped to $10.67 billion, down 10.3% from $11.89 billion in March, as COVID-19-related impacts slowed demand from U.S. buyers.
While the value of ag imports dropped to $11.40 billion in April, down 8% from $12.39 billion in March, it left a deficit for the month of $733.8 million. This marked the second monthly batch of trade red ink for the sector in a row and the third in four months.
The fall in exports being more dramatic than the fall in imports matched the overall trade picture in April where exports were at $151.3 billion, down 20.5%, while imports were at $200.7 billion, down 13.7%.
So far in Fiscal Year (FY) 2020, U.S. ag exports are valued at $81.9 billion against imports of $78.04 billion for a trade surplus of $3.86 billion. So far in FY 2020, the value of ag exports and imports are both above the same point in FY 2019.
USDA has lowered its forecast for FY 2020 U.S. ag exports to $136.5 billion ($139.5 billion prior) and trimmed the import outlook to $130.2 billion ($132.5 billion), leaving a surplus of $6.3 billion. To meet USDA’s forecasts, exports would have to average $10.92 each month and imports $10.432 billion.
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USDA as of June 3 paid out $545 million in payments via the Coronavirus Food Distribution Program (CFAP). Of the payments, $140.3 million have been made for non-specialty crops (corn, soybeans, etc.), $8.4 million in specialty crops, $267.8 million for livestock and $128.6 million for dairy.
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There have been payments made to 35,000 producers so far, according to USDA Secretary Sonny Perdue, with more than 86,000 applications filed with USDA.
The specialty crops are small possibly because many have had no prior participation in FSA programs, contacts advise.
But the levels for non-specialty crops could also be the unpriced inventory issue that has caused program implementers some problems. And, the process with Farm Service Agency offices being impacted by COVID-19 issues could also be playing a role.
Washington Insider: Complicated Jobs Report Brings Some Relief
The monthly U.S. jobs report can often surprise relative to projections, but forecasts have never been so spectacularly wrong as they were for May’s data out Friday. The “miss” raised the question of why it was so wide, Bloomberg is reporting.
A record 2.5 million workers were added by employers during the month, compared with a median projection for a loss of 7.5 million jobs. Of the 78 economists surveyed by Bloomberg, the most optimistic forecast called for an 800,000 decline. Their estimates also expected the unemployment rate to approach 20% -- the highest since the Great Depression in the 1930s -- when in fact it declined to 13.3%.
Playing a huge role in economists’ forecasts were floods of applications for jobless insurance and tens of millions of Americans still on benefit rollsâ??larger that the U.S. has ever experienced in such a short timespan. Moreover, economists’ models “probably” failed to fully take into account the government’s relief response, specifically the Paycheck Protection Program that provides firms funding to keep workers on staff.
Before this year, the biggest single-month miss on the payrolls report was 318,000 in February 2003, according to Bloomberg survey data going back to 1996. The sudden nature of the downturn is putting a premium on real-time data to help produce more in-the-ballpark estimates for economic data.
"These improvements in the labor market reflected a limited resumption of economic activity that had been curtailed in March and April due to the coronavirus pandemic and efforts to contain it," the Bureau of Labor Statistics said. "In May, employment rose sharply in leisure and hospitality, construction, education and health services, and retail trade. By contrast, employment in government continued to decline sharply."
The Washington Post asked, is there a mistake in the data? The BLS, which is part of the Labor Department “admitted” there was a classification error. In a special note, it said the May unemployment rate would be about 16.3%, down from an April unemployment rate of more than 19%, if this error hadn’t happened.
This meant that some people who should have been classified as unemployed were instead classified as employed but “absent” from work for “other reasons.” This “other reason” category is normally used for people on vacation, serving jury duty or taking leave to care for a child or relative. But in this unusual pandemic circumstance, the “other reason” category got applied to some people sitting at home and waiting to be called back.
The same thing happened in April, and would have added nearly another five percentage points to the 14.7% unemployment rate for that month, the agency said. BLS does not like to change people’s answers, because they don’t want to tamper with the data.
In conclusion, the Post said that whether you look at the official unemployment or this amended unemployment rate, “the bottom line remains: Unemployment is still high, but it went down slightly in May.”
The Post also “vouched” for the BLS. “You can 100% discount the possibility that political interference occurred. Not 98% discount, not 99.9% discount, but 100% discount,” tweeted Jason Furman, the former top economist for President Barack Obama. “BLS has 2,400 career staff of enormous integrity and one political appointee with no scope to change this number.”
The bureau used the same methodology that it uses every month: It looks at who was working and who wasn’t mid-month. Specifically, the agency looked at the week of May 10 to 16. Like always, the Census Bureau collected data for the BLS in two ways. In one survey, census workers literally go out and ask some people about their situation and in the other, BLS workers look at company and government payrolls from 140,000 establishments to see how many people are employed and how many hours they are working.
The Post notes that “even the latest data shows 28 million people had their job cut or hours reduced during the pandemic. Plus, an alarming number â?? 2.3 million people â?? now say they have permanently lost their jobs.”
In the end, perhaps the best figure to look at to gauge the health of the labor marketâ??and how the economic rebound is goingâ??is what share of the adult U.S. population is employed. Economists call this the “employment-to-population ratio.” It plunged in April and has come back only slightly.
Any improvement is encouraging. It makes a difference for those who did get their jobs back. But it’s clear there’s still a long way to go to get back to anything close to pre-pandemic levels.
So, we will see. Forecasting job numbers is always tricky and difficult, and during a pandemic, everything is different. Clearly, it will be a severe challenge to learn just how to read the numbers now in a period of dramatic change, a challenge that likely will be with us for some time, Washington Insider believes.
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