We expect the U.S. economy to shed 7.8 million jobs and the unemployment rate to reach 21.5% when the May U.S. employment estimate is released on Friday.
To put this in the proper context, the near real-time data implies that greater than 40 million people have lost employment and income in less than three months, with 16.6 million people filing for first-time jobless benefits during the May sampling period of the Bureau of Labor Statistics.
For this reason, Friday’s jobs report will not only be dated, but will also most likely not adequately capture the true nature of the collapse in American domestic employment since the onset of the coronavirus pandemic.
We will continue to place an emphasis on weekly initial and continuing jobless claims, as well as the monthly job openings, layoffs and labor turnover data to study labor market flows.
Like the April U.S. monthly employment report, we would strongly urge clients to all but ignore the average hourly earnings data, which will likely increase by 1% on the month and 8.5% on a year-ago basis.
This will be due to compositional effects linked to the loss of jobs at the lower end of the income spectrum and is not indicative of any near-term breakout in employment among upper-income earners or across the economy.
Rather, we would urge policymakers and forward-looking firm managers to closely scrutinize hours worked and aggregate hours.
Total hours worked increased 0.3% in April, while manufacturing hours worked declined by 5.2% to 38.3 hours. Aggregate hours worked declined by 14.9% to 93.9. The latter two foreshadowed the drop of 13.6% in April personal spending. Further declines in hours worked would imply weaker momentum in the household sector heading into the summer.
For more information on how the coronavirus is affecting midsize businesses, please visit the RSM Coronavirus Resource Center.
