Special Alert: Economist Update
Last Friday’s Employment report from the Bureau of Labor Statistics came in better than expected. Employment rose by 1.8 million, against an expectation of about 1.5 million, and the headline unemployment rate, U3, fell to 10.2% versus an expectation of 10.7%.
The largest gains were in the hospitality and leisure sector, adding 592,000 jobs. Government employment gains were the second strongest, but this seems to be due to a quirk in the interaction of the pandemic with seasonal factors. Retail trade, services, and healthcare also posted strong gains. Other sectors saw more modest gains with the exception of mining, which saw a minor employment decline.
The broadest measure of labor underutilization, U6, fell from 18.0% to 16.5%, and the overall labor force participation rate was essentially stable.
While not as strong a report as last month’s, these are still remarkable numbers and, importantly, are notably higher than consensus forecasts.
The pace of the recovery in the job market is slowing – I am not sure I would call it V-shaped, but it is still pretty good. What happens in the next couple of weeks with the pandemic will tell us a lot. Another obstacle to recovery could be unemployment compensation. The additional $600/week in benefits may not be renewed, which would negatively impact personal consumption spending.
As for this morning’s summary of initial claims for unemployment, reports came in better than expected. While this number represents a smaller segment of the overall labor market and can be quite noisy, it still contains some useful information. The number of new claims fell below 1 million for the first time since the crisis started, to 963,000, when 1.1 million was expected. I think a more important measure is the number of continuing claims, which fell by 600,000 to 15.5 million; this means that more people left unemployment due to hiring in the previous week than lost their job -- a net positive.
-Tom Cunningham, Ph. D., Retired Senior Economist, Federal Reserve Bank of Atlanta