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Look forward at June 1, 2020 week: Employment data for May will still be bad, if less bad

A look forward to the June 1 week sees an absence of Fed policymakers as the communications blackout period around the June 9-10 FOMC meeting is in effect. As such, there will be no comments from the Fed about the tone of the week’s economic data, including the all-important monthly employment data for May.

The release of the Employment Situation for May at 8:30 ET on Friday will encompass the survey reference period through May 16. That should be sufficient to capture the worst of the increases in unemployment in recent weeks. I would anticipate another surge in the unemployment rate, although perhaps not the over 10 points to 14.7% in April from March. Some workers did get recalled when paycheck protection funding became available. Declines in payroll levels should be less severe as well. However, it will still be evident in the numbers that job losses have disproportionately affected lower wage workers, and that those workers on the margins who were finding jobs are once more being pushed out.

The ADP National Employment Report for May at 8:15 on Wednesday will be another hard one for private payroll. While the 20-million+ jobs lost in April is not expected to be repeated on that scale, layoffs were still widespread and massive.

The Challenger report on layoff intentions for May at 7:30 ET on Thursday should show that 2020 to-date has record numbers of layoff intentions announced. Surveys of manufacturing and service sector businesses hint that many are anticipating improved conditions six months from now, so it is possible that longer-term layoff intentions could have eased. However, with a deep recession just starting and high levels of uncertainty about the outlook, layoff intentions will still be numerous and across industries.

As levels of new filings for unemployment benefits continue to ebb, initial jobless claims data for the week ended May 30 at 8:30 ET on Thursday could be nearing 1 million for the first time since the onslaught of claims began in mid-March. This is still an enormous number of filings that will roll over on to continuing claims rolls. However, with scattered public-facing commercial activity restarting, at least some workers will be recalled.

The May ISM Manufacturing Index is at 10:00 ET on Monday and the Non-Manufacturing Index is at 10:00 ET on Wednesday. Regional surveys of economic activity suggest that conditions were a little improved for the factory sector in May while the service sector remained constrained by lack of orders and revenue. However, both sectors still are in deep recessionary territory and the ISM numbers should reflect that at a national level.

New orders for all factory goods in April at 10:00 ET on Wednesday may get a little help in the form of stable prices for petroleum which will not drag down the total for nondurables orders. Durable orders will continue to be weak in terms of dollar value even if the month-to-month declines have slowed to a trickle.

Sales of new motor vehicles for May are expected on Tuesday. It is difficult to envision these falling significantly from the decades-low of 8.6 million units (SAAR) in April which was little more than half the number of units sold just a few months ago. These may even increase a bit. However, consumers were unlikely to be ready to take on big ticket purchases just yet with widespread unemployment and justifiable concerns about the overall state of the economy until the COVID-19 pandemic is under control.

Data on the international trade balance in goods and services for April at 8:30 ET on Thursday will provide an update to the advance numbers on trade in goods only, and help set expectations for GDP in the second quarter. So far the very early Nowcasts of GDP in the second quarter are pointing to a shockingly deep contraction.

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