The Start of a Recovery or a One-Time Bounce? Week of June 1 – 5

The labor market provided a surprise to the upside in May, even as both the manufacturing and service sectors continued to struggle. Here are the five things we learned from U.S. economic data released during the week ending June 5.


Some employees returned to the workplace in May. Nonfarm employers added a seasonally adjusted 2.509 million workers to their payrolls during the month, per the Bureau of Labor Statistics. This follows a record 20.687 million eliminated jobs in April and another 1.373 million workers shed in March. Private-sector payrolls expanded by 3.094 million workers while the government let go 585,000 workers (including a drop of 487,000 by local governments). The service sector payrolls swelled by 2.425 million while the goods-producing side of the economy added 669,000 workers. Industries adding the most workers in May were leisure/hospitality (+1.239 million), construction (+494,000), health care/social assistance (+390,700), retail (+367,800), manufacturing (+225,000), and professional/business services (+127,000).

Based on a separate household survey, the unemployment rate fell 1.4 percentage points to 13.3 percent. The unemployment rate was 4.4 percent in March and 3.5 percent in February. But like in April, the BLS believes that there was miscoding of some survey respondents’ statuses and indicates the unemployment rate may be three percentage points higher than reported above. 1.746 million people entered (or re-entered) the labor market after 6.432 million left it in April. Also rebounding was the labor force participation rate, adding 6/10ths of a point to 60.8 percent (March 2020: 62.7 percent). Shrinking was the number of part-time workers seeking a full-time job: at 10.633 million people, down 254,000 for the month but well above the 5.765 million count in March. The U-6 series, which is the broadest measure of labor underutilization, declined by 1.6 percentage points to 21.2 percent. It was at 6.9 percent as recently as February.

The manufacturing sector contracted at a slower rate in May. The headline index from the Institute for Supply Management’s Manufacturing Report on Business—the PMI—added 1.6 points during the month to a reading of 43.1 after having had shed 7.6 points in April. This was the third consecutive month (and eighth time over the past ten) in which the PMI was under a reading of 50.0, indicative of a contracting manufacturing sector. Rebounding were PMI components tied to new orders, production, employment, and inventories, although all were still indicating a contraction. Six manufacturing industries expanded in May, led by nonmetallic mineral products, furniture, and apparel. The report stated that May was a “transition month” as some businesses returned to work but notes that “demand remains uncertain.”

…as did the service sector. The NMI, the headline index from the ISM’s Nonmanufacturing Report on Business, rose by 3.6 points to a reading of 45.4. This followed April sharp 10.7-point drop in April and was the second straight month below a reading of 50.0. NMI components tied to business activity/production, new orders, and employment all improved from their April marks but continued to denote a contraction. Only four of 18-tracked industries reported growth in May: agricultural, finance/insurance, public administration, and information. The report noted that survey respondents “remain concerned about the ongoing impact of the coronavirus” but also were “hoping and/or planning for a resumption of business.”

Trade activity decelerated greatly in April. The Census Bureau and the Bureau of Economic Analysis report that export activity slowed 20.5 percent during the month to a seasonally adjusted $151.3 billion (its lowest reading since April 2010) while imports dropped 13.7 percent to $200.7 billion (its lowest reading since August 2010). As a result, the trade deficit surged 16.7 percent to -$49.4 billion. The goods deficit widened by $5.8 billion to -$71.8 billion (its biggest since last September) while the services surplus fell by $1.2 billion to +$22.4 billion (its smallest since December 2016). In the case of the former, exports fell sharply for capital goods (including aircraft and engines), industrial supplies/materials (including for oil and petroleum goods), and automotive vehicles.  

Factory orders plummeted for a second straight month in April. The Census Bureau estimates new orders for manufactured goods fell 13.0 percent in April following an 11.0 percent decline in March. Durable goods orders slumped 17.7 percent, pulled down in part by the 48.3 percent fall in orders for transportation goods. Nondurable goods orders decreased by 9.0 percent. Shipments sank 13.5 percent, split between 17.7 percent and 9.0 percent for durable and nondurable goods, respectively. The value of unfilled orders narrowed 1.6 percent to $1.108 trillion, while inventories shrank 0.4 percent to $686.5 billion.

Other U.S. economic data released over the past week:

  • Jobless Claims (Week ending May 30, First-Time Claims, seasonally adjusted): 1,877,000 (-249,000 vs. the previous week, +1,657,000 vs. the same week a year earlier). 4-week moving average: 2,284,000 (+1,052.5% vs. the same week a year earlier).
  • Construction Spending (April 2020, Value of Construction Put in Place, seasonally adjusted annualized rate): $1.346 trillion (-2.9% vs. March 2020, +3.0% vs. April 2019).
  • Consumer Credit (April 2020, Outstanding Non-Real Estate-Back Credit Balances, seasonally adjusted): $4.133 trillion (vs. March 2020: -$68.7 billion, vs. April 2019: +1.8%).
  • Productivity (Q1 2020, Nonfarm Business Labor Productivity, seasonally adjusted annualized rate): -0.9% vs. Q4 2019, +0.7% vs. Q1 2019.

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

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