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Look behind at March 30, 2020 week: Data starting to catch up with events, but not there yet

A look behind at the March 30 week shows consumer confidence shaken as the labor market deteriorates rapidly. Even the more current monthly data for March seems to downplay just how bad it is out there for individuals and businesses, at least at the national level. Some of this is due to the timing of data collection, and a number of reports were more aligned with the first half of the month rather than the second.

It is a befuddling time when the Employment Situation – normally the premiere among the high frequency economic data – gets largely dismissed. However, that is the case with the March numbers. The timing of the survey reference week meant that most of the data was gathered for conditions prior to the pay period that included March 12. Although cutbacks in hiring were prevalent, the weekly claims data puts most of the payroll declines after that. The BLS noted that the huge drop of 701,000 in payrolls could have been greater for the month as a whole. Additionally, challenges in accurately classifying workers who were temporarily laid off but expect to return to their jobs may have contributed to an undercount of the unemployed. The jump in the rate to 4.4% in March from 3.5% in February may be too low by as much as a full percentage point. The two-tenths decline in the workweek to 34.2 hours seems too small compared to anecdotal evidence, and the 0.4% month-over-month increase for average hourly earnings seems more an artifact of pre-pandemic conditions. In short, the focus is already on five weeks from now when the April report is set for release at 8:30 ET on Friday, May 8.

On the other hand, the enormous increase in weekly initial jobless claims seems all too credible. The unadjusted level of claims nearly doubled with an increase of 2.904 million to 5.824 million in the March 28 week. It is useless to look at adjusted claims levels since the factors bear no relation to the present reality. The unadjusted insured rate of unemployment was up 0.9 point to 2.3% in the March 21 week, reflecting to first week of massive increases in continuing claims.

The Challenger report on layoff intentions took a nearly 300% rise in March to 222,288. It was not surprise that the bulk of the intentions were concentrated in entertainment/leisure (93,193) and services (37,854) but there was plenty of spillover into other industries. What was interesting was that hiring intentions exploded 835% to 824,610 in March. Much of this was in retail (462,010) and transportation (302,000). Stores are bringing on people where they can to beef up their online shopping presence and get goods out to homebound consumers. These may be temporary jobs, but anecdotal evidence says businesses are having to pay a premium to get these workers – and keep their permanent employees – during the pandemic. Some of these jobs are likely to go to workers not eligible for unemployment benefits.

The ADP National Employment Report for March was way out of line with the BLS data on private payrolls. ADP reported payrolls down -27,000 compared to the -713,000 in the government numbers. I would look for some big revisions next month.

The ISM Manufacturing Index for March dipped to 49.1 from 50.1 in February. This was a much smaller decline than markets had anticipated. However, the tone of the details and respondents’ comments showed that the negative impacts associated with measures to keep COVID-19 from spreading rapidly had and were expected to take a heavy toll. Much the same could be said of the results of the ISM Non-Manufacturing Index survey. The headline registered expansion for a 122nd straight month at 52.5 in March after 57.3 in February, but the details suggested the trajectory was down.

The Conference Board’s Consumer Confidence Index for March fell to 120.0, its lowest since 120.0 in July 2017. Worries about current conditions didn’t increase much from the prior month, but the six month outlook nosedived.

Sales of motor vehicles in March veered off course. Total sales of passenger vehicles and light trucks fell to 11.4 million units (SAAR) after 16.7 million in February. Heavy truck sales skidded to 291,000 after 453,000. The sharp pull back in purchases of motor vehicles means far less support for consumer spending and business investment at the end of the first quarter.

The data on factory orders in February seems so far in the rear view that it is hardly worth mentioning. The headline showed overall orders were flat with nondurables down 1.2% and durables up 1.2%. However, the new orders indexes in various regional surveys of manufacturing suggest orders have fallen sharply in March.

The same could be said of the NAR’s Pending Home Sales Index for February. The index managed a 2.4% month-over-month increase, much stronger than widely expected. However, these are contracts signed, not closed. While the index tends to lead sales, I would anticipate many of these contracts will fall through in March. Construction spending in February was down 1.3% with a bright spot in private residential building of single-family units rising 3.9%. So far the backlog of housing should mean homes will continue to be built, at least until the present contracts are fulfilled.

The week’s data has led to some downward revisions in the various Nowcasts for first quarter GDP. None of the three actually look like a solid forecast at the moment. What can be inferred is that the March data is going to turn what was originally a quarter of around 2% growth into one that may not avoid a decline.


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