{"id":1744,"date":"2020-05-28T10:55:33","date_gmt":"2020-05-28T14:55:33","guid":{"rendered":"https:\/\/naroffeconomics.com\/?p=1744"},"modified":"2020-05-28T10:55:33","modified_gmt":"2020-05-28T14:55:33","slug":"weekly-jobless-claims-april-durable-goods-orders-and-pending-home-sales-and-revised-1st-quarter-gdp","status":"publish","type":"post","link":"https:\/\/naroffeconomics.com\/?p=1744","title":{"rendered":"Weekly Jobless Claims, April Durable Goods Orders and Pending Home Sales and Revised 1st Quarter GDP"},"content":{"rendered":"\n

KEY DATA:<\/strong>  Claims: 2.1 million; Insured: -3.86 million\/\nDurables: -17.2%; Vehicles: -52.8%; Capital Spending: -5.8%\/ Pending Sales: -21.8%\/\nGDP: -5.0% (previously -4.8%)<\/p>\n\n\n\n

IN A\nNUTSHELL:<\/strong>  \u201cPeople are going back to work, but layoffs\nremain extraordinarily high.\u201d<\/em><\/strong><\/p>\n\n\n\n

WHAT IT\nMEANS:<\/strong> The\neconomy is opening and the PPP is kicking in, so what is happening to\nlayoffs?  They remained above two million<\/em><\/strong>,\na number that just two months ago would have been characterized as\nincomprehensible.  In this world of \u201cwhat\nhave you done for me lately\u201d, this is likely to be viewed as \u201cgood\u201d because it\nis the lowest in nine weeks.  But really,\nis\nthere any reason to see something positive in this level of claims?  No.<\/em><\/strong> \nIt signals that firms and governments are still massively cutting\nworkers.  The number of people receiving\nunemployment checks fell dramatically.  <\/em><\/strong>That,\nof course, was expected to happen.  As a\nconsequence, the so-called insured rate, which is the percentage of the labor\nforce receiving benefits, fell.  <\/p>\n\n\n\n

Durable goods orders plummeted in April<\/em><\/strong>, but the decline was actually in\nline with estimates.<\/em><\/strong>  April was\nwhen everything shut down, so a double-digit drop was hardly a surprise.  The biggest decline was in the vehicle\nsector.<\/em><\/strong>  With sales cratering, and the\nassembly lines shuttered, that too was not a shock.<\/em><\/strong>  Conditions are changing in May, so look for\nthings to start to turnaround in the next report.  One number, though, should be watched more\nclosely.  The proxy for business investment\nspending \u2013 nondefense, nonaircraft capital goods orders \u2013 fell significantly.  It is not clear if, when or why this measure\nwill turnaround.  <\/em><\/strong><\/p>\n\n\n\n

The National Association of Realtors reported that pending\nhome sales, a measure of future existing home purchases, fell sharply in April.<\/em><\/strong>  That does not bode well for the spring sales\nnumbers.<\/em><\/strong>  The largest drop was in\nthe Northeast, where signed contracts fell by nearly fifty percent.  But the declines were fifteen percent or more\nin the other three regions, so you can say that the weakness was widespread.  <\/p>\n\n\n\n

First quarter GDP was revised downward a touch, but the new number doesn\u2019t change anything.<\/em><\/strong>\u00a0 It really doesn\u2019t matter if we are talking about a drop of 4.8% or 5%, activity fell sharply in the first quarter.\u00a0 What is important is that the hole we are digging turned out to be a little bit deeper than initially thought. <\/em><\/strong>And with second quarter GDP likely to be down at least 20%, even with the economy reopening, it could take two years to get back to the fourth quarter 2019 GDP level.\u00a0 \u00a0\u00a0\u00a0<\/p>\n\n\n\n

IMPLICATIONS: We are entering the confusion stage for the employment and unemployment numbers.\u00a0 Reopening of the economy is taking people from government payrolls to private sector payrolls, which is good.\u00a0 But the PPP is creating problems with understanding what exactly is happening.\u00a0 <\/em><\/strong>As I noted in my many criticisms of the PPP, the requirements of hiring back a high percentage of form employees, whether they were needed or not, would hide the true state of unemployment.\u00a0 Those workers who are rehired to meet the PPP requirements but who essentially do nothing, are still functionally unemployed.\u00a0 But for statistical purposes, they are considered to be employed.\u00a0 That artificially lowers the unemployment rate without raising production.\u00a0 It also artificially raises the payroll numbers.<\/em><\/strong>\u00a0 I am pretty sure that obfuscating the true state of the labor market was an intent of the law, as it only made it difficult for firms to operate efficiently.\u00a0 Thus, the massive drop in the number of people on unemployment doesn\u2019t necessarily translate into a strong rise in output.It does, however, hide the true labor market weakness. <\/em><\/strong>\u00a0What worries me is that once the PPP deadlines are met, if the firm still doesn\u2019t need the workers, we could see a surge in layoffs.\u00a0 That would be happening even though the number of people on unemployment would have been falling for weeks.\u00a0 The point is that as we move through June and start approaching the PPP deadlines, the likely decline in insured unemployment could be overstating the pace of improvement.That is what happens when politicians develop programs aimed at altering economic data, not economic reality.Indeed, if many workers are forced to leave unemployment for lower-paying, non-productive private sector jobs, consumer spending and productivity could decline.\u00a0 That would wind up hurting the recovery, not helping it.<\/em><\/strong>\u00a0 I will try to provide the necessary caveats about the data, but since we have no measure of the number of workers hired because of the PPP but who are functionally unemployed, any interpretation will be suspect. <\/p>\n","protected":false},"excerpt":{"rendered":"

KEY DATA:  Claims: 2.1 million; Insured: -3.86 million\/ Durables: -17.2%; Vehicles: -52.8%; Capital Spending: -5.8%\/ Pending Sales: -21.8%\/ GDP: -5.0% (previously -4.8%) IN A NUTSHELL:  \u201cPeople are going back to work, but layoffs remain extraordinarily high.\u201d WHAT IT MEANS: The economy is opening and the PPP is kicking in, so what is happening to layoffs?  … Continue reading Weekly Jobless Claims, April Durable Goods Orders and Pending Home Sales and Revised 1st Quarter GDP<\/span> →<\/span><\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[],"class_list":["post-1744","post","type-post","status-publish","format-standard","hentry","category-economic-indicators"],"_links":{"self":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1744","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1744"}],"version-history":[{"count":2,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1744\/revisions"}],"predecessor-version":[{"id":1746,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1744\/revisions\/1746"}],"wp:attachment":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1744"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1744"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1744"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}