{"id":1767,"date":"2020-06-18T10:44:49","date_gmt":"2020-06-18T14:44:49","guid":{"rendered":"https:\/\/naroffeconomics.com\/?p=1767"},"modified":"2020-06-18T10:44:49","modified_gmt":"2020-06-18T14:44:49","slug":"weekly-unemployment-claims-june-philadelphia-fed-manufacturing-survey-and-may-leading-indicators","status":"publish","type":"post","link":"https:\/\/naroffeconomics.com\/?p=1767","title":{"rendered":"Weekly Unemployment Claims, June Philadelphia Fed Manufacturing Survey and May Leading Indicators"},"content":{"rendered":"\n

KEY DATA:<\/strong>  Claims: 1.51 million (down 58,000); Continuing\nClaims: 20.54 million (down 62,000)\/ Phila. Fed: +70.6 points; Orders: +42.4\npoints; Employment: +11 points\/ LEI: +2.8%<\/p>\n\n\n\n

IN A\nNUTSHELL:<\/strong>  \u201cProgress is being made on the unemployment\nfront, but it is disappointingly slow.\u201d<\/em><\/strong><\/p>\n\n\n\n

WHAT IT\nMEANS:<\/strong>  <\/em>Even\nthough the economy continues to reopen, the focus of attention remains on the\nlabor market and right now, the improvement is less than hoped for.  New claims for unemployment insurance fell only\nmodestly.  <\/em><\/strong>Yes, a 58,000-drop is\na lot of people on an absolute basis, but given the huge number of people\ncontinuing to file \u2013 over 1.5 million – it is not that great.  With the entire country loosening\nrestrictions, it was expected that the pace of workers being let go would\ndecline and that would lead to a sharp drop in the number of people receiving\nunemployment checks.  While the\ncontinuing claims number did fall, the pace of decline was also disappointing. <\/em><\/strong><\/p>\n\n\n\n

The Philadelphia Fed\u2019s manufacturing index\nskyrocketed in early June.  It was\nexpected to improve, but not nearly as massively as we saw.  However, this is a dispersion index and as I\nhave mentioned before, you have to read these results carefully.<\/em><\/strong>  There are three categories in the survey,\nincrease, no change and decrease.  When\nyou go from decrease to either no change or increase, the index rises.  When you go from no change to increase, the\nindex rises.  Thus, firms that had\nlargely shut down in April, started to reopen in May and the process accelerated\nin early June.  So they tended to move \u201cup\u201d\nfrom decrease or no change.  Most\nfirms are now either no longer cutting production or have stabilized (no\nchange) or started back up.  But the\nreport says nothing about the pace of activity.<\/em><\/strong>  So, you can have a huge change in the index\nwithout a similar huge change in production. \nA sign that is the case is the employment index.  It was still negative, but layoffs are\noccurring at a slower pace.  Thus, don\u2019t\nlook at this report as saying manufacturing in the Mid-Atlantic region is\nsurging.<\/em><\/strong><\/p>\n\n\n\n

The Conference Board reported that its Leading\nEconomic Index jumped in May.  Again,\nthis is a measure that has to be analyzed in detail and the details don\u2019t say\nthe economy is going to soar.<\/em><\/strong>  As the\nreport noted, \u201cThe relative improvement\nin unemployment insurance claims is responsible for about two-thirds of the\ngain in the index\u201d.  <\/em>But we know, the\nlevel of claims remains at incomprehensibly high levels, so I am not impressed\nwith the increase.  Indeed, I\nagree with the conclusion of the report: \u201cThe breadth and depth of the decline\nin the LEI between February and April suggest the economy at large will remain\nin recession territory in the near term.\u201d \n<\/em><\/strong><\/p>\n\n\n\n

IMPLICATIONS:<\/strong>  Unfortunately, the best way to describe the\ntoday\u2019s labor market numbers is disappointing. <\/em><\/strong> It is clear that a large number of firms and\ngovernments are continuing to cut their workforces.  Over the past four weeks, roughly seven\nmillion workers filed for unemployment compensation.  That is huge and it is important because as\nfirms reopen, they are hiring back workers, which should lower the unemployment\nrate.  But before that can happen, hiring\ncompanies first have to overcome the loss of jobs from businesses cutting back\nand that level is extraordinarily high.<\/em><\/strong> \nWe can see that problem in the continuing claims data.  The number of people receiving unemployment\nchecks hardly declined, indicating that at least so far, hiring firms are\nbarely overcoming the firing firms.<\/em><\/strong> \nThus, the may not see a major decline in the June unemployment rate.\nIndeed, if BLS finally corrects its misclassification problem, we could\nactually see the rate rise from the May published rate.<\/em><\/strong>  That is because the \u201creal\u201d or \u201ccomparison\u201d\nrate is not 13.3% but something around 16.3%. \nConditions are improving, but we need to stop looking at the percentage\nchanges and start focusing on levels. \nWhen you start at a very low level, the percentage change is going to be\nlarge.  That is just simple math.  But if the level remains low compared to\npre-virus levels, that indicates the size of the hole that we still have to\nclimb out of.  Right now, with 20.5\nmillion people still receiving unemployment checks and undoubtedly many\nmillions more unemployed, the hole remains extremely deep.  Almost certainly, fiscal policy will have to\nstep up once again when the current unemployment subsidies disappear as\nscheduled to happen at the end of July. \nOtherwise household incomes will fall sharply and much of the current\nrebound will fade.      <\/em><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

KEY DATA:  Claims: 1.51 million (down 58,000); Continuing Claims: 20.54 million (down 62,000)\/ Phila. Fed: +70.6 points; Orders: +42.4 points; Employment: +11 points\/ LEI: +2.8% IN A NUTSHELL:  \u201cProgress is being made on the unemployment front, but it is disappointingly slow.\u201d WHAT IT MEANS:  Even though the economy continues to reopen, the focus of attention … Continue reading Weekly Unemployment Claims, June Philadelphia Fed Manufacturing Survey and May Leading Indicators<\/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":[1],"tags":[],"class_list":["post-1767","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"_links":{"self":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1767","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=1767"}],"version-history":[{"count":1,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1767\/revisions"}],"predecessor-version":[{"id":1768,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1767\/revisions\/1768"}],"wp:attachment":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1767"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1767"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1767"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}