NAM: Monday Economic Report
The Bureau of Labor Statistics released new employment numbers on Friday, which were essentially a “time capsule” of what the labor market looked like for the reference week, which was March 8–14. Since then, businesses closed or reduced activity, and Americans sheltered in place to limit the spread of COVID-19.
The weekly initial unemployment claims for the weeks that followed suggest that the U.S. economy came to a screeching halt, with millions of Americans losing their jobs and with the unemployment rate likely already 10% right now, and rising. Nonetheless, even with some aging, the data reflect the economic damage that was already pervasive just a few weeks ago.
Specifically, nonfarm payrolls plummeted by 701,000 workers in March, the largest monthly decline in 11 years, with manufacturing employment down by 18,000 for the month. The service sector was hit the hardest, losing 659,000 workers in March, and the unemployment rate rose to 4.4%, a rate not seen since August 2017.
The ADP report, released earlier in the week, also did not yet reflect the true economic impacts for March. Yet, it did show that the smallest businesses (i.e., those with fewer than 50 employees) were the ones bearing the largest brunt of the COVID-19 outbreak, at least at that point.
Sentiment data released last week suggest that manufacturers are seeing widespread declines in activity in March, except for China, which appears to show signs of stabilizing. Here are some highlights:
The ISM® Manufacturing Purchasing Managers’ Index® declined in March, albeit not at a pace that many feared, with new orders and employment contracting at the fastest paces since March 2009 and the underlying data negative across the board.
The IHS Markit Manufacturing PMI fell from 50.7 in February to 48.5 in March, the lowest reading since August 2017.
Looking at the top 10 markets for U.S.-manufactured goods, according to IHS Markit, nine of the PMIs in those markets had lower manufacturing activity readings in March than in February, and only China and the Netherlands reported slight expansions.
The Dallas Federal Reserve Bank’s survey plummeted to -70.0 in March, the lowest reading since the survey began in 2004, as manufacturers grappled with both COVID-19 and sharply reduced energy prices.
Other data also reflected weaknesses in the economy, including the following:
New orders for manufactured goods were flat in February, but were skewed by a large jump in ships and boats. Excluding transportation equipment, orders decreased 0.9%. Core capital goods spending—a proxy for capital expenditures in the U.S. economy—decreased 0.9% in February, declining 0.6% over the past 12 months.
The U.S. trade deficit fell to the lowest level since September 2016, largely from a sharp decline in goods imports. Trade volumes were lower, as global economies began to deal with the COVID-19 outbreak. For instance, the goods trade deficit with China was the lowest since March 2009. On the positive side, the petroleum trade surplus was the largest on record.
Consumer confidence, according to the Conference Board, fell to the lowest level since July 2017, as Americans became more concerned with the COVID-19 outbreak and its implications. The increased uncertainty, especially in financial markets, helped to reduce assessments of both current and future economic conditions, but especially the outlook component.