• AIM Team

NAM: Monday Economic Report

  • There were 311,000 manufacturing job openings in April, edging up slightly from the 310,000 postings in March, which was the slowest pace since October 2016. To illustrate just how much the pace of job openings has eased recently, there were 408,000 as recently as January, and one year ago, the rate was a robust 479,000. Indeed, the COVID-19 outbreak has altered the manufacturing labor market dramatically.

  • The manufacturing sector hired 305,000 workers in April, with 706,000 separations. Net hiring in April was -401,000. In the larger economy, nonfarm business job openings declined sharply for the second straight month, down from 7,004,000 in February, to 6,011,000 in March, to 5,046,000 in April, the weakest pace since December 2014.

  • After experiencing more job openings than the number of people looking for work for 24 straight months, the abrupt stoppage of economic activity amid the COVID-19 outbreak sharply reversed that trend, starting in March. There were 23,078,000 unemployed Americans in April—the figure declined to 20,985,000 in May but remained historically elevated, according to the latest jobs data.

  • Weekly initial unemployment claims data have continued to decelerate since peaking at 6,867,000 for the week ending March 28, with 1,542,000 claims filed for the week ending June 6—a still highly elevated level. Over the past 12 weeks, 44,209,000 Americans filed for unemployment insurance. Meanwhile, there were 20,929,000 individuals continuing to receive unemployment insurance for the week ending May 30, or 14.4% of the workforce.

  • After the release of the May jobs numbers, there was a lot of discussion about the “misclassification” of employment data in recent months. It might be helpful to outline what is known about this issue, which the Bureau of Labor Statistics outlined here:

  • Workers who were not employed but planned on being called back at some point should be classified as “unemployed on temporary layoff,” but instead, many were marked as “employed but absent from work for ‘other reasons.’” As a result of this miscalculation, the unemployment rate could have been 16.4% in May instead of the 13.3% that was officially reported.

  • This issue was also true in April, and the unemployment rate could have been 19.5% instead of 14.7% for that month. February and March data were also likely impacted, but to a smaller extent.

  • With all of that said, the data do not take away from the fact that the unemployment rate unexpectedly fell in May, and it is still true that the unemployment rate remains the worst since the Great Depression, well surpassing numbers seen in recent recessions.

  • To “maintain data integrity,” the BLS does not plan to make any changes to its survey or its data collection methods. If it were to make such changes, it might be more difficult to make historical comparisons.

  • Other economic highlights last week included the following:

  • The National Bureau of Economic Research officially said that the U.S. economy slipped into a recession in February, which was not a surprise, ending a recovery that lasted 128 months, the longest on record.

  • The Federal Open Market Committee kept interest rates unchanged, as expected, but more importantly, it signaled that Federal Reserve participants do not anticipate any changes to rates through 2022. FOMC officials forecast a 6.5% decline in real GDP growth in 2020, with the unemployment rate falling to 9.3% in the fourth quarter.

  • Consumer and producer prices moved in opposite directions in May, but both continued to reflect deflationary pressures in the U.S. economy due to COVID-19 and the global recession. Not surprisingly, food prices increased sharply in May, with energy costs down dramatically, especially on a year-over-year basis.

  • Small business optimism rebounded somewhat in May, even as firms continue to struggle. Respondents to the survey from the National Federation of Independent Business cited poor sales as the top “single most important problem” for the second straight month, with mixed news for hiring and capital spending in the data.

  • Consumer sentiment also improved in June preliminary data but remained well below levels seen in February before the COVID-19 outbreak. Americans remained uncertain in their outlook, which could dampen their willingness to make some discretionary purchases, according to the University of Michigan and Thomson Reuters.