This Week in Economic News: August 3-7, 2020
Third consecutive month of job growth
- The economy beat expectations by adding 1.8 million jobs. The unemployment rate lowered from 11.1% to 10.2% as a result. Before the pandemic, the highest unemployment rate ever recorded by the Bureau of Labor Statistics was 10.8%.
- U-6, a broader measure of unemployment, decreased from 18.0% to 16.5%.
- The economy is showing resilience, as it added jobs for a third consecutive month. It recovered nearly 9.3 million of the 22 million jobs lost since pandemic.
- Job gains were greatest in leisure and hospitality, government, and retail trade.
- Temporary layoffs decreased while permanent job losses remain stagnant.
- Job recovery is still contingent on the path of the coronavirus.
(About the Employment Situation: The Employment Situation tracks how many jobs were created/lost, the unemployment rate, and wages. This report gives the clearest monthly snapshot of how healthy the economy is.)
ISM Manufacturing and Non-Manufacturing PMI
Manufacturing and services sectors are growing after implementing safety precautions
- The ISM Manufacturing and Non-manufacturing PMI both increased for the third and second straight month respectively, signaling an expansion in the economy in July.
- Only three of thirty three sectors of the economy reported a contraction.
- Orders increased while deliveries slowed, which both indicate a rise in consumer demand.
- Businesses are adjusting safety practices in order to ensure that employees and consumers are safe. According to a respondent in the Computer and Electronics Products sector, “We have implemented a number of safeguards that are costing extra money, but we are running,” while in the Education Services sector, “We’re still not certain whether or not the students will be coming back in their full capacity due to COVID-19. This has caused an influx of ordering safety supplies to prepare for the possibility. We have certainly increased our purchasing in the past month or so by a large amount.”
(ISM PMI: The Institute for Supply Management surveys each month purchasing and supply executives on the current state of their industries and their contributions to GDP.)
Labor market continues recovery as Unemployment Insurance claims decrease
- Initial claims decreased nearly 250,000. This is the highest decrease since June 6th.
- PUA initial claims also decreased by nearly 250,000
- Continuing claims dropped by nearly 850,000, whereas PUA continuing claims dropped by 70,000.
- The record for initial claims was nearly 7 million due to the pandemic. A normal rate for initial claims is an average of 350,000 per week. The record for state continuing claims is nearly 25 million due to the pandemic. A normal amount of state continuing claims is approximately 2.7 million. Continuing claims encompassing all UI benefit programs total more than 31 million.
(About unemployment insurance: Initial claims are new claims by jobless workers who are looking to receive unemployment benefits. Continuing claims are those who continue to receive unemployment benefits because they have not found a job yet. Continuing claims does not count all jobless workers – just jobless workers who are receiving unemployment benefits. There may be jobless workers who do not apply for, are ineligible for, or exhausted all of their unemployment benefits which would not be counted.
Note on PUA: PUA provides for retroactivity to January 27, 2020. State challenges implementing PUA led to significant claims backlogs and backdated claims are included in the continuing claims number. For example, if a jobless worker applied and was determined eligible for eight weeks of PUA benefits, but the state processed those claims on week eight, then a total of 8 claims are counted in week eight for the jobless worker instead of one claim each week. In addition, if an individual was potentially eligible for weeks of PUA benefits during the period the state did not have the program operational, the individual could file for multiple weeks of PUA in the same week. As a result, PUA continuing claims are likely an overcount and exceed the number of individuals actually receiving PUA.)
When: Monday, August 10, 2020:
What to Expect: As the economy continues to recover and with recent positive reports on the employment situation and unemployment insurance claims, an increase in job openings and positive turnover is expected.
(About the JOLTS Report: The JOLTS Report provides a snapshot of labor demand. It reports the amount of job openings, hires, and voluntary/involuntary separations.)
NFIB Small Business Optimism Index
When: Tuesday, August 11, 2020:
What to Expect: Due to the threat of continued lockdowns by local officials, small businesses may report certain amounts of uncertainty.
(About the NFIB Small Business Optimism Index: The NFIB Small Business Optimism Index provides an insight into small businesses’ sentiment and economic outlook on labor markets, capital spending, sales, etc.)
When: Friday, August 4, 2020:
What to Expect: Retail sales may continue their positive streak as more people regain their jobs and businesses reopen or continue to operate and serve customers.
(About Retail Sales: The Census Bureau reports monthly the amount of sales that occurred in retail and food services. This report provides a perspective on the health of the economy as more than two-thirds of the economy is fueled by consumer spending.)