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Look forward at May 4, 2020 week: Jobs, jobs, jobs, or rather absence of jobs

A look forward to the May 4 week necessitates bracing for a series of truly frightening numbers for the labor market. The numbers are going to be unprecedentedly bad and have no context in which to compare them to. Lacking that, all that can be said is that economic harm inflicted by the COVID-19 pandemic will need an equally unprecedented response to relieve the damage.

Initial jobless claims for the week ended May 2 at 8:30 ET on Thursday will precede the numbers on Employment Friday, but since the data is too late for the monthly survey by the Bureau of Labor Statistics (BLS), will have to be considered on their own. The pace of jobless claims have ebbed from the peak in the March 28 week, but remain at jaw-dropping levels. Nonetheless, the focus is starting to shift from the number of claims coming in to the sky-high levels of insured unemployment that will need to be serviced until the economy opens up again and workers on temporary layoff return to payrolls.

The scale and speed of job losses as seen in the initial jobless claims since mid-March is the best preview for the upcoming April Employment Situation on Friday, May 8 at 8:30 ET. The BLS survey reference period for March ended on the 14th, just before the first tidal wave of claims began to hit. The survey reference period for April ended on the 18th, just after the crest of that wave. During the 5-week reference period, claims totaled about 24.4 million. Strangely, during that period there were a few sectors like delivery services that actually added large numbers of jobs as consumers made far more extensive use of online shopping and food services. Also seeing higher demand was healthcare and some education services. Nonetheless, it speaks to a plunge in nonfarm payrolls well over 20 million. This dwarfs the over 5 million jobs lost in the entire recession of December 2007-June 2009. Hours and earnings will be substantially hurt as well, and the unemployment rate is expected to skyrocket.

The ADP National Employment Report for April at 8:15 ET on Wednesday is expected to include a sharp downward revision to the March number which was a measly 27,000 lower in comparison to the BLS change in private payrolls of down 713,000. The April headline change in private payrolls is likely to be a dramatic decline that will inform the last-minute expectations among forecasters.

The Challenger report on layoff intentions in April at 7:30 on Thursday is harder. Massive numbers of layoffs are behind most businesses and weren’t in the immediate business plan. So what is intended going forward against a backdrop of high uncertainty is far harder to anticipate. What the numbers may reflect is that businesses are anticipating they will need their experienced employees again sooner rather than later, so layoff intentions could be relatively modest in the circumstances. Even if the number is huge – and it could be given that payrolls are often the first cost to cut – it is important to remember that not all layoff intentions are for immediate cuts, and not all actually come to pass if businesses find activity no longer requires it. In any case, there may well be another acceleration in layoffs for retail and in services forced by widespread closures during the weeks of stay-at-home orders.

The NFIB will release its monthly jobs report on Thursday. It is likely to reflect the severity of the challenges facing smaller firms while the quarantines are in place.

The ISM Non-Manufacturing Index for April at 10:00 ET on Tuesday is anticipated to reflect the collapse of activity for firms deemed nonessential during the pandemic and the loss of orders and revenues. The average of the District Bank surveys of service sector activity for April fell to -79.9 after -28.4 in March. This suggests that the national index will be running at perhaps half of its 52.5 reading in March. The series low is 37.6 back in November 2008 and something along these lines is to be expected.

The dollar value of new orders for factory goods in March at 10:00 ET on Monday will compound the already-reported 14.4% drop in durables with another month of steep declines in nondurables related to the fall in energy prices.

The Fed’s Senior Loan Officer Opinion Survey of Bank Lending Practices is expected at 14:00 ET on Monday, although it is not officially on the schedule. It could be of unusual interest as the April edition will cover the period of volatility for credit markets in the early weeks of the pandemic response and the special questions could address some of the concerns about where the worst stresses are for lenders and borrowers.
The data on international trade in goods and services in March at 8:30 ET on Tuesday and the numbers of wholesales trade for March at 10:00 ET on Friday will fill out some of the assumptions in the estimates for first quarter GDP. The second estimate will be released at 8:30 ET on Thursday, May 28. However, at this point anything pertaining to growth in the second quarter is more compelling. District Bank GDP Nowcasts are less divergent than they often are. With the three averaging -14.02% for the second quarter, a double-digit decline in growth seems inevitable.

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