NAM: Monday Economic Report
The U.S. economy added 2,509,000 nonfarm payroll workers in May, a pleasant surprise relative to expectations for millions of fewer workers in the labor market. The data suggest that the jobs market stabilized sooner than anticipated, even as the labor market remains very weak, with the latest figures reflecting a sizable bounce back after the loss of 20,687,000 workers in April.
The unemployment rate rose from 14.7% in April to 13.3% in May, with the number of unemployed workers falling from 23,078,000 in April to 20,985,000. With that said, the so-called “real unemployment rate”—which includes those marginally attached to the workforce, including discouraged workers and the underemployed—remained quite elevated despite dropping from 22.8% in April to 21.2% in May.
In May, manufacturers added 225,000 workers, recovering some of the decline of 1,324,000 employees lost in April, with 14 of the 19 major sectors experiencing increases for the month. The current outlook is for manufacturing employment to bounce back to roughly 12,250,000 workers by year’s end, with an unemployment rate around 10%.
It is interesting to juxtapose the latest jobs numbers with the weekly initial unemployment claims data. The latter have found that 42,647,000 Americans had filed for unemployment insurance in the past 11 weeks, with the weekly pace slowing since peaking during the week ending March 28.
Meanwhile, after falling at the fastest pace in 11 years, the Institute for Supply Management® reported that the rate of decline in manufacturing activity slowed somewhat in May, rising from 41.5 in April to 43.1 in May. Even as this continues to reflect sharp contractions in activity across the board, the data also suggest that the worst of the downturn might be behind us.
Some of the other economic indicators released last week show the extent of the recession’s negative impacts on manufacturing in April, before some of the rebounds seen in the May data.
New orders for manufactured goods fell 13% in April, the largest monthly decline on record, extending the 11% decrease in March. Excluding transportation equipment, new factory orders fell 8.5% in April. On a year-over-year basis, new orders in the manufacturing sector have fallen by a sharp 22.3% since April 2019, or 13.2% year-over-year with transportation equipment excluded.
The U.S. trade deficit rose to an eight-month high, but the data reflect significant reductions in trade volumes in light of COVID-19 and slowing global growth, with goods exports and imports falling to their weakest pace since at least 2010.
In non-seasonally adjusted data, U.S.-manufactured goods exports fell 10.25% in the first four months of 2020 relative to the same time frame in 2019.
Total private construction spending fell 3% in April, with private residential and nonresidential activity down 4.5% and 1.3%, respectively. Manufacturing was a bright spot—so to speak—eking out a 0.2% gain for the month.