May unemployment was worse than expected, signaling another bad jobs report
State reopenings have not yet helped stem the rise in unemployment, which is expected to show another big jump in the month of May.
Weekly jobless claims totaled 2.4 million for the week ending May 16, bringing the total number of claims filed since late March to 38.6 million. For the week of May 9, continuing unemployment claims, reflecting people who collected benefits for at least a second week, rose to 25.1 million, an increase of 2.5 million from the previous week.
Jefferies economists said they had been hopeful last week that labor market job losses were closer to plateauing, when there was a much lower increase in people continuing to receive benefits. “This week’s data dashes all that,” they said.
The economists say their model now suggests 10.3 million jobs will be lost when the government reports the May employment report on June 5, but they are not yet forecasting that number and are awaiting more data. In April, 20.3 million jobs were lost and the unemployment rate rose to 14.7% from 4.4%.
“It is looking like May is shaping up to be worse for the labor market than we had initially thought,” the Jefferies economists wrote. “We noted in our response to the April employment data that we expected that we would see another drop in payrolls in May of about 1 million, followed by a strong rebound in June. However, the stubbornly high levels of both initial and continuing claims suggest that we are actually in store for another historic drop in payrolls in May.” They added that they continue to see a snap back in June as states open more businesses.
“I’d love to see a big drop in continuing claims because that would really be a sign of rehiring,” said Diane Swonk, chief economist at Grant Thornton. She said there had been signs that manufacturers were rehiring, and she was hopeful state reopenings and the government’s Payroll Protection Program would result in a reduction in the number of workers still receiving claims. “Those things should be moving. It’s still being overwhelmed by the tidal wave of losses.”
Economists say part of the problem with the growing numbers of claims could be the fact that states have been overwhelmed by the vast numbers of claims, and they are being delayed as a result. But it also suggests that there could be a higher level of unemployment than expected and it could linger longer than many expected.
The number of new claims was lower than the 2.7 million filed in the prior week, and well off the peak of 6.9 million in late March.
Swonk said economists are now watching another number that is growing as states now grant unemployment to self-employed and gig workers, as provided under the CARES Act. There were 2.2 million claims reported under the Pandemic Unemployment Assistance Program, but Swonk said that number could be 1 million lower because Massachusetts reduced its initial number by that amount.
As of May 2, 6.1 million were in that category, separate from the millions counted as continuing claims.
The government conducted its collection of data for the May jobs report last week, which included May 12.
“This is the week of the survey. … It tells us May is going to be another bloody month, with a lot of downward revisions for an even worse month of April,” said Swonk. “May will be a much worse unemployment rate because people will be looking for jobs again and their layoffs weren’t as temporary as they had hoped.”
She said the payrolls for April could increase by another 5 million or 6 million, and the same number could show up in May job losses. In April, one bright spot had been the fact that 78% of workers surveyed by the government believed their layoffs to be temporary.
Chris Rupkey, chief financial economist at MUFG Union Bank, said if you add the claims from the last survey week, in the April jobs report, another 16.6 million jobless claims were filed. “That would put the unemployment rate at about 25.4%,” he said.
“The floodwaters are still rising in the labor market, and it doesn’t look like there’s any hope at the moment,” he said. “You’re already on top of your house right now, and it’s looking pretty bleak. We’re expecting the state openings to bring down job losses.”
www.cnbc.com 2020-05-21 22:06:30