The Almost Decade Long Winning Streak Is Over: March 30 – April 3

Employment data, combined with consumer sentiment and purchasing managers’ reports, paint an ugly picture. Here are the five things we learned from U.S. economic data released during the week ending April 3.

#1The number of jobless claims doubled at the end of March. A seasonally adjusted 6.648 million people made first-time claims for unemployment insurance benefits during the week ending March 28. This was up 3.341 million from the prior week and a whopping 3,150 percent increase from the same week a year earlier. The Department of Labor press release noted that the service industry, and namely accommodation/food services, led the surge in jobless claims. Other industries listed by states as contributing to layoffs were health care/social assistance, manufacturing, retail, wholesale trade, and construction. One note of caution with this data is that reported issues in filing for jobless benefits suggest these numbers underestimate the true count of people losing their jobs in recent weeks.

#2Even before the vast shutdown mid-month, payrolls were contracting aggressively. The Bureau of Labor Statistics had closed its March surveys before “many coronavirus-related business and school closures that occurred in the second half of the month.” Even still, the report was horrible. Nonfarm payrolls contracted by a seasonally adjusted 701,000 during the month, the most since March 2009 and breaking a nearly decade-long streak of job additions. Next month’s number will be orders of magnitude larger. The cuts were widespread with drops for the service and goods-producing side of the private sector economy of -659,000 and -54,000, respectively. Leisure/hospitality payrolls contracted by 459,000, by far the most of any industry and followed by health care/social services (-61,200), professional/business services (-52,000), retail (-46,200), construction (-29,000), and manufacturing (-18,000). Average weekly earnings held up for now, with the $28.62 median hourly wage up 3.1 percent from a year earlier.

The separate survey of households (also closed by mid-month) has the unemployment rate growing to 4.4 percent—next month’s reading will be much larger. 1.633 million people left the labor market as the labor force participation rate slumping 7/10ths of a month to 62.7 percent. The 25-54 labor force participation rate shed 4/10ths of a point to 82.6 percent. Demonstrating the massive increase in the number of unemployed adults is the median length of unemployment, which fell by 2.1 weeks to 7.0 weeks. Blooming was the count of involuntary part-time workers, which grew by 1.447 million to 5.765 million (the most since October 2016). The broadest measure of labor underutilization, the U-6 series, surged by 1.7 percentage points to 8.7 percent (its highest reading in four years). 

#3So, it is not surprising that consumer confidence plummeted in March. The Conference Board’s Consumer Confidence Index fell by 12.6 points to a seasonally adjusted 120.0 (1985=100). The overwhelming majority of the decline resulted from deteriorating views of the future—the expectations index shed 19.9 points to a reading of 88.2 while the current conditions measure lost “only” 1.6 points. The latter’s small decline was, per the press release, “reflective of an economy that was on solid footing” before the surge in layoffs and furloughs. The press release also said that sentiment was “more in line with a severe contraction – rather than a temporary shock – and further declines are sure to follow.” 

#4Manufacturing contracted in March. The PMI, the Institute for Supply Management’s measure for manufacturing activity lost a full point to a reading of 49.1. This was the sixth time over the past eight months in which the PMI was below 50.0, indicating a contracting manufacturing sector. Measures for new orders, production, and employment all fell sharply. Ten of 18 tracked industries reported growing during March, led by printing, food/beverage, and apparel. The press release stated that the pandemic and “shocks in global energy markets have impacted all manufacturing sectors” and warned that respondents’ near-term growth sentiment was “strongly negative, by a 2-to-1 ratio.”

#5The service sector held out for one more month in March. The headline index from the ISM’s Nonmanufacturing Report on Business shed 4.8 points in March to a reading of 52.5. This was the 122nd straight month in which the NMI pointed towards an expanding service sector (presumably for the last time for a while). Indicators for business activity, new orders, employment, and inventories all declined. Nine of 18 tracked service sector industries expanded, led by health care/social assistance, real estate, and public administration. The press release noted that companies “are concerned about the coronavirus impact on the supply chain, operational capacity, human resources and finances, as well as the ramifications for the overall economy.” 

Other U.S. economic data released over the past week:
International Trade (February 2020, Goods and Services Surplus/Deficit, seasonally adjusted): -$39.9 billion (-12.2% vs. January 2020, -22.1% vs. February 2010). Exports: $137.2 billion (-0.4% vs. January 2020, -1.5% vs. February 2019). Imports: $247.5 billion (-2.5% vs. January 2020, -4.7% vs. February 2019).
Factory Orders (February 2020, New Orders, seasonally adjusted): $497.4 billion (Unchanged vs. January 2020, +0.1% vs. February 2019).
Construction Spending (February 2020, Value of Construction Put in Place, seasonally adjusted): $1.367 billion (-1.3% vs January 2020, +6.0% vs. February 2019).
Pending Home Sales (February 2020, Index (2001=100), seasonally adjusted): 111.5 (vs. January 2020: 108.9, February 2019: 101.9).
Case-Shiller Home Price Index (January 2020, 20-City Index, seasonally adjusted): +0.3% vs. December 2019, +3.1% vs. January 2019.
Agricultural Prices (February 2020, Prices Received by Farmers): +1.8% vs. January 2020, +0.1% vs. February 2019.

The opinions expressed here are not necessarily those of Kevin’s current employer. No endorsements are implied.

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