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Musing on Economics
US Experiences Highest Unemployment Rate Since 1948
May 10, 2020
The employment report for April defined the seriousness of the economic damage from the deepest of the Coronavirus shutdowns. Nonfarm payrolls were down 20.5m versus March, and the unemployment rate skyrocketed to around 14.7%, the highest since 1948.
During the subprime-mortgage panic of 2008, payrolls declined 8.7 million over a 25-month period. The US lost almost three times as many jobs in just one month. The highest unemployment rate since the wind-down from World War II was 10.8% at the end of the 1981-82 recession. The jobless rate peaked at 10.0% after the Great Recession. The unemployment rate is expected to be even higher in May, and it unlikely that $2.5 trillion in government spending offset more than 50% of the damage. While the economic damage is horrific, there are some positive signs. While 30 million workers filed for unemployment benefits in the past six weeks, those currently receiving benefits (what are called "continuing claims") are up a smaller 16 million in the first five weeks of that period and will be up around 20 million for the full six-week period. That's still awful, but hints that the Payroll Protection Plan and areas of actual job creation, such as online retailing and delivery services, are offsetting some of the damage.
The job destruction will be accompanied by a very large decline in GDP. Expect a contraction at a 30% annual rate in the second quarter which will be made public in late July, and by then the economy could be expanding, albeit from a low base. During the week ending Saturday May 2, 939,790 passengers went through TSA checkpoints at airports, up 26% from the prior week and up 40% from two weeks ago. The amount of motor gasoline supplied has grown three weeks in a row, and is up a total of 16%. Hotel occupancy and railcar traffic are both up from a month ago. But activity is still down substantially from year-ago levels, or even those in January, but there are signs of life; more cars on the road and more activity, including in businesses that are still required to be closed to the public but are preparing for clearance to re-open. Apple looks at "routing requests" on map applications. In mid-April, both walking and driving requests were down roughly 60% from January 13th. As of Saturday, walking and driving requests were only down 29% and 16%, respectively. This "high frequency data" gives a forward looking insight into economic growth, but the recession will be brutal, the worst of our lifetimes. It is not a normal recession, and it will also be short. From: FTAdvisors
US Experiences Highest Unemployment Rate Since 1948
May 10, 2020
The employment report for April defined the seriousness of the economic damage from the deepest of the Coronavirus shutdowns. Nonfarm payrolls were down 20.5m versus March, and the unemployment rate skyrocketed to around 14.7%, the highest since 1948.
During the subprime-mortgage panic of 2008, payrolls declined 8.7 million over a 25-month period. The US lost almost three times as many jobs in just one month. The highest unemployment rate since the wind-down from World War II was 10.8% at the end of the 1981-82 recession. The jobless rate peaked at 10.0% after the Great Recession. The unemployment rate is expected to be even higher in May, and it unlikely that $2.5 trillion in government spending offset more than 50% of the damage. While the economic damage is horrific, there are some positive signs. While 30 million workers filed for unemployment benefits in the past six weeks, those currently receiving benefits (what are called "continuing claims") are up a smaller 16 million in the first five weeks of that period and will be up around 20 million for the full six-week period. That's still awful, but hints that the Payroll Protection Plan and areas of actual job creation, such as online retailing and delivery services, are offsetting some of the damage.
The job destruction will be accompanied by a very large decline in GDP. Expect a contraction at a 30% annual rate in the second quarter which will be made public in late July, and by then the economy could be expanding, albeit from a low base. During the week ending Saturday May 2, 939,790 passengers went through TSA checkpoints at airports, up 26% from the prior week and up 40% from two weeks ago. The amount of motor gasoline supplied has grown three weeks in a row, and is up a total of 16%. Hotel occupancy and railcar traffic are both up from a month ago. But activity is still down substantially from year-ago levels, or even those in January, but there are signs of life; more cars on the road and more activity, including in businesses that are still required to be closed to the public but are preparing for clearance to re-open. Apple looks at "routing requests" on map applications. In mid-April, both walking and driving requests were down roughly 60% from January 13th. As of Saturday, walking and driving requests were only down 29% and 16%, respectively. This "high frequency data" gives a forward looking insight into economic growth, but the recession will be brutal, the worst of our lifetimes. It is not a normal recession, and it will also be short. From: FTAdvisors
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