NAM: Monday Economic Report
The U.S. economy lost 20,500,000 workers in April, the largest monthly decline in employment in the history of the series, as the nation struggles with the abrupt halt in business activity amid the COVID-19 outbreak. Manufacturers shed 1,330,000 employees for the month, also a record monthly loss, with employment dropping to the lowest level since January 2010 and with declines in every manufacturing sector. The current outlook is for manufacturing employment to bounce back to roughly 12,250,000 million workers by year’s end.
The unemployment rate soared to 14.7% in April, a staggering pace of job loss not seen since the Great Depression. At the same time, the so-called “real unemployment rate”—which includes those marginally attached to the workforce, including discouraged workers and the underemployed—rose to 22.8% in April. The participation rate in the labor force dropped from 62.7% in March to 60.2% in April, with 6,570,000 more Americans leaving the labor force.
Of course, the key to the data will be the extent to which these jobs return once economic activity starts to resume and stay-at-home orders are lifted. Of the 20,626,000 workers who lost their job in April, 78.6% of them, or 18,063,000, said they were on “temporary layoff.” That suggests that the vast majority of nonfarm payroll workers plan to return to work once they are able to do so.
There were 3,169,000 initial unemployment claims for the week ending May 2, and over the past seven weeks, 33,483,000 Americans filed for unemployment insurance, illustrating dire conditions in the labor market as the COVID-19 crisis has taken hold. The unemployment rate could peak around 20% to 22% this month before starting to fall. The current forecast is for the unemployment rate to be 9% to 10% by year’s end.
The severe negative economic impacts of COVID-19 can be seen in other data released last week as well.
New orders for manufactured goods fell 10.3% in March, the largest monthly decline since July 2014, with a decrease of 3.7% with transportation equipment excluded. Durable and nondurable goods orders fell 14.7% and 5.8% in March, respectively, with durable goods sales excluding transportation down a more modest 0.4% for the month. Nonetheless, new orders for core capital goods (or nondefense capital goods excluding aircraft)—a proxy for capital spending in the U.S. economy—edged down 0.1% in March, declining 0.8% over the past 12 months.
Meanwhile, factory shipments decreased 5.2% in March, with durable and nondurable goods shipments off 4.7% and 5.8%, respectively.
The U.S. trade deficit rose from $39.81 billion in February to $44.42 billion in March, but the increase came largely from dramatically reduced trade volumes globally. Goods exports and imports fell to levels not seen since 2017. Exports for automotive vehicles and parts were at levels not seen since November 2011, and the March goods trade deficit with China was the lowest since March 2004.
In non-seasonally adjusted data, U.S.-manufactured goods exports have fallen 4% in the first quarter of 2020 relative to the first three months of 2019.
U.S. consumer credit outstanding fell 3.4% in March. More importantly, revolving credit (which includes credit cards and other credit lines) plummeted 30.9% for the month, reflecting the anxiousness of the consumer and the extent to which purchases—at least those done on credit—have fallen sharply.
Manufacturing labor productivity fell 3.3% at the annual rate in the first quarter, the fastest rate of decline since the fourth quarter of 2015. Output in the sector fell sharply at rates not seen since the second quarter of 2009, plummeting 7.1%.