Jobless Claims Build, Confidence Falls: April 6 – 10

Americans continued filing for jobless claims as consumers and businesses grew gloomy. Here are the five things we learned from U.S. economic data released during the week ending April 10.

#1Another historic week for jobless claims. The Department of Labor reports there were a seasonally adjusted 6.606 million first-time claims made for unemployment insurance benefits during the week ending April 4. This represented a 261,000 decline from the prior week but also a 3,150 percent jump from the year-ago pace. (Filing difficulties in some states likely have suppressed the reported claims numbers.) There were 7.455 million people receiving continued unemployment insurance benefits during the week ending March 28, well above the 1.705 million people count from the same week a year earlier.

#2Consumer sentiment is in a freefall. The preliminary April reading of the University of Michigan’s Index of Consumer Sentiment nosedived by 18.1 points (the largest single-month decline in the 50-plus year history of the index) to a seasonally adjusted reading of 71.0. The measure has lost 30.0 points over the last two months. The current conditions index has lost 31.3 points so far in April to 72.4, while the expectations index shed 9.7 points to 70.0. The press release noted that the relatively “small” drop in expectations reflected a belief among consumers that “the infection and death rates from COVID-19 would soon peak and allow the economy to restart.” If and when that fails to materialize, “a renewed and deeper slump in confidence” will emerge. 

#3Small business owner sentiment deteriorated rapidly in March. The Small Business Optimism Index from the National Federation of Independent Business dropped by 8.1 points during the month to a seasonally adjusted reading of 96.4. This was the measure’s lowest reading since November 2016 and the biggest single-month drop in the study’s history. Nine of the ten index components fell in March, led by huge drops for expected real sales, expected economic conditions, whether it is a good time expand, and plans to increase employment. The press release stated, “[t]he small business sector is anticipating and bracing for continued economic disruptions going forward.” 

#4Prices fell in March. The Consumer Price Index (CPI) declined 0.4 percent on a seasonally adjusted basis during the month, its biggest single-month decline since January 2015, per the Bureau of Labor Statistics. Energy prices plummeted 5.8 percent, pulled down by a 10.5 percent drop in gasoline prices and declining electrical (-0.2 percent) and natural gas (-1.4 percent) utility prices. Food prices gained 0.2 percent. Net of energy and food, core CPI decreased for the first time in ten years with a 0.1 percent decline. While prices rose for used cars/trucks (+0.8 percent) and medical care services (+0.5 percent) but plummeted for apparel (-2.0 percent), transportation services (-1.9 percent), and new vehicles (-0.4 percent). CPI has grown 1.5 percent over the past year, while the core measure has a 12-month comparable of +2.1 percent.

Meanwhile, the final demand wholesale prices slumped for a second consecutive month, shedding a seasonally adjusted 0.2 percent. The core Producer Price Index (PPI), which nets out foods, energy, and trade services, also pulled back 0.2 percent in March. Energy prices plunged 6.7 percent (gasoline: -16.8 percent) while food prices held steady (although prices for eggs and frozen foods rose). Final demand services PPI edged up 0.2 percent as the measure for trade services (which measures retailer and wholesaler margins) surged, but the measure for transportation/warehousing plummeted. PPI has grown a modest 0.7 percent over the past year, while core PPI has gained 1.0 percent over the past year.

#5The number of job openings narrowed in February. The Bureau of Labor Statistics estimates there were a seasonally adjusted 6.882 million open jobs at the end of the month, off 120,000 from January and 2.4 percent from a year earlier. At the time, this is significantly greater than the number of unemployed adults (5.787 million). A few industries reported year-to-year increases in job openings; including, the government (+11.1 percent), financial activities (+9.3 percent), and education/health services (+3.1 percent). Openings were below their year-ago comparables at wholesale trade (-19.4 percent), manufacturing (-9.1 percent), retail (-8.1 percent), and leisure/hospitality (-7.4 percent). Hiring slipped by 29,000 jobs to 5.896 million, which was up 3.4 percent from a year earlier. Separations contracted in February, dropping by 143,000 for the month and 2.0 percent over the previous year. Obviously, this will not hold true in the coming months. 

Other U.S. economic data released over the past week:
Wholesale Trade (February 2020, Inventories of Merchant Wholesalers, seasonally adjusted): $655.8 billion (-0.7% vs. January 2020, -1.3% vs. February 2019).
Consumer Credit (February 2020, Outstanding Non-Real Estate-Backed Consumer Debt Balances, seasonally adjusted): $3.129 trillion (+$18.1 billion vs. January 2020, +4.9% vs. February 2019).
Monthly Treasury Statement (March 2020, Federal Budget Surplus/Deficit): First six months of FY2020: -$743.6 billion (vs. +7.6% vs. the first six months of FY2019).
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The opinions expressed here are not necessarily those of Kevin’s current employer. No endorsements are implied.

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