Jun 14, 2020
The Current Economic Picture
The National Bureau of Economic Research recently declared that we entered a recession in February 2020 but also cautioned that the unique qualities of this contraction may end up making it a much briefer episode than downturns of the past. Many leading indicators are pointing to a bottoming process in certain parts of the economy as pandemic related restrictions are beginning to be lifted around the country.
Initial Jobless Claims for the week of June 6, 2020 remain stubbornly high at 1.5 million but that is a significant reduction from the recent peak of 6.8 million.
Total claims, at 44.4 million since March 14, 2020, have surpassed several prior recession totals and only trail the severe double dip recession that occurred between 1980 and 1982.
To understand the enormity of what these claims represent in their totality, there have been more initial jobless claims filed in the prior two months than there are people living in the entire nation of Canada.
Continued claims, a good indicator of current unemployment, represents workers that filed for initial claims and continued receiving them as they remained eligible. Continued claims will be a key indicator to watch because, as temporary layoffs subside, furloughed workers must return to their employer or risk being ineligible to receive further payments. The latest release, at 20.9 million, indicates a significant portion of the workforce has yet to return to work.
The biggest sign of positive news came in the form of monthly payroll data released by the Department of Labor. The economy regained 2.5 million jobs in the month of May and the unemployment rate reduced from 14.7 to 13.3 percent. Virtually all economists predicted another negative reading for the month of May and a continued rise in the unemployment rate. In fact, it was the largest forecast miss in history.
2.5 million jobs being gained in one month is an all time record but it was preceded by a loss of 20.5 million jobs in April. Nonetheless, economics is as much about trajectory and momentum as it is about absolute standing. If the trends developing in May continue through June, we may well see another strongly positive report. The biggest question remaining for those interested in the long-term prospects of recovery will be how many workers are left permanently unemployed after the initial wave of returning furloughs has subsided. Federal Reserve leaders seem to think we will still be at an unemployment rate of 9.3 percent by the end of the year. That will certainly be an improvement compared to where we are now but also a reminder of how long and arduous the road to recovery may end up being.
