After the announcement of less-bad-than-expected (un-)employment numbers yesterday CNBC headlined:
The recovery from the coronavirus sure looks V-shaped, going by these charts
A better headline would have been:
Can you believe that we could make up charts that show a V-shape?
The piece starts:
The U.S. economy added a record number of jobs in May as it appeared to bounce off the bottom of the coronavirus recession, and now the chart of jobs gains and losses is starting to look like a “V.”
bigger
That graph is straight out of How to Lie With Charts or similar books and pieces. A huge drop in the number of employed followed by a much smaller increase is mangled into a graph that somehow shows a V.
A real plot of the (un-)employment numbers, here from the Calculated Risk blog, looks much different:
bigger
Yes, the Bureau of Labor Statistics has announced an increase in employment numbers:
Total nonfarm payroll employment rose by 2.5 million in May, and the unemployment rate declined to 13.3 percent, the U.S. Bureau of Labor Statistics reported today.
However, the BLS added a technical caveat that many media failed to report. Its data, which is based on household and establishment surveys, does not have a 'Covid-19 epidemic' category which led to a statistical quirk:
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).
Even if those numbers were included the real number of people out of work who are looking for jobs is still higher. The U-6 category of the BLS statistic (Table A-15), which includes all people looking for work, shows that there were 21.2 million unemployed. That number is only 1.6 million lower than it was last month.
That the employment number increased was unexpected. Bill McBride of Calculated Risk suggests this explanation for the increase:
Since the reference week included the 12th of May, this was too soon to be impacted by "reopenings" in most areas. That will be more of a June story. Instead this increase in employment was likely due to companies rehiring because they let too many people go in April, and because some companies needed to rehire to qualify for PPP [Payroll Protection Plan] forgiveness.
Under the Payroll Protection Plan companies could get access to government loans which will not have to be paid back if they keep a certain number of people on their payroll for several months. Those companies who only recently entered that program might have had to rehire people to qualify.
But back to the CNBC chart fakers. Here is the second one they show to support their V-thesis:
Mobility data from Apple showed that requests in directions for driving and walking had nearly recovered to pre-pandemic levels by June 1. The increase in travel demand has extended to flying as well, with major airlines announcing this week that they are bringing back some of the flights that they had suspended due to the pandemic.
bigger
The Apple data does not show that "requests in directions for driving and walking had nearly recovered to pre-pandemic levels by June 1". Apple does not provide the absolute numbers. It only says how the number of requests have changed. The graph shows that the absolute number of requests had been falling rapidly since early March but has now stopped falling further. The absolute numbers have not yet increased above the low pandemic level.
The third chart CNBC uses for its V-shape theory is of oil markets:
Markets data has also shown sharp recoveries. Oil prices show perhaps the most dramatic “V” as light trading ahead of a contract expiration for West Texas Intermediate resulted in a brief plunge below $0 for the first time ever in April.
That sell-off may prove to be a historical anomaly, but a combination of increased gasoline demand and production cuts has brought the U.S. benchmark oil price back to near where it was in early March.
bigger
The WTI oil price plunge below zero was of course a quirk that is unlikely to repeat itself. The now slightly rising oil price does not show an economic recovery. It only demonstrates that OPEC and others producers have massively cut their production. The lower supply now fits the low current demand.
To demonstrate a V-shape the CNBC author selected a three month period. But oil had been falling this the beginning of the year.
bigger
The oil price is still some 30% lower than it was at the beginning of the year. Th global oil demand has slumped since the very beginning of the pandemic crisis and has not come back. That is why OPEC today held another meeting and announced additional production cuts over a longer time period.
At the end of the CNBC piece we learn why the charts were made up:
At a news conference on Friday, President Donald Trump said “We’ve been talking about the ‘V’ — this is better than a ‘V.’ This is a rocket ship.”
The fake charts are supposed to support Trump's nonsense claim.
The number of new Covid-19 cases in Texas, California and several other states is still increasing. The crisis is not over. Recessions have quite lengthy consequences and the recovery from this one will likely take years.
bigger
As Yves Smith remarked today on the employment numbers:
Way too early to open the champagne. I had expected a W shaped recovery, an initial bounce followed by a reversal, independent of a second wave. Infection rates are still rising in a lot of states. Given the fits and starts with getting PPP funds to employers, most if not virtually all are in the period where they have to maintain payrolls. I’ve heard directly from business owners that they expect to have to cut heads, so that bleed will start shortly.
The U.S. economy is down by 50%. Many of the recently lost jobs will not come back. Any hyping of a V-shape recovery only prevents Congress from taking the necessary measures, like launching large infrastructure programs, to help the millions of jobless to again gain some work.