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In This List
COMMENTS

Economic Research: U.S. Biweekly Economic Roundup: Strong Job Gains May Slow As Virus Surges

COMMENTS

History Of U.S. State Ratings

COMMENTS

U.S. State Ratings And Outlooks: Current List

COMMENTS

COVID-19 Impact: Key Takeaways From Our Articles

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Default, Transition, and Recovery: Consumer And Service Sector Defaults Help Push The 2020 Corporate Tally To 147


Economic Research: U.S. Biweekly Economic Roundup: Strong Job Gains May Slow As Virus Surges

As economic activity continued to gradually reopen across the country nonfarm payrolls rose by 4.8 million in June, beating the median consensus forecast of 3 million. Combined with upwardly revised monthly job gains of 2.7 million in May (was 2.5 million), the economy has recovered about 34% of the deep hole made during March and April. Almost 15 million jobs remain to be recovered. The unemployment rate is down to 11.2% now, and the broader U-6 measure of unemployment also declined--to 18% in June from 21.2% in May. (The downward bias in reporting unemployment rate due to misclassification was reduced by the Bureau of Labor Statistics [BLS] from about 3 percentage points to now 1 percentage point.)

Chart 1

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Job gains were widespread across industries, with particularly large gains in leisure and hospitality (2.1 million), retail trade (740,000), education and health services (568,000), and manufacturing (356,000). Manufacturing has recovered less than half of the 1.4 million jobs lost since February. Finer industry classification reveals that restaurant and bar reopenings alone added 1.5 million jobs, accounting for almost a third of the total gains.

Mining and logging continued to shed jobs, reflecting the below-break-even oil price outlook in the energy sector, and state governments continued to lose jobs, down 25,000 in June--both important exceptions to the overall trend. State governments have consistently lost jobs during the pandemic, an important observation for Congress as it contemplates the next round of fiscal relief, in which aid to states should be an essential component. If states--which are mandated to have a balanced budget--do not get federal aid of hundreds of billions to offset lost revenues and increased expenditure during their fight against the pandemic, the recovery of the labor market is going to be hit directly, and the negative impact will spill over into other private sectors.

Millions of furloughed workers were called back, and people on temporary layoff fell 4.8 million in June to 10.6 million. This is a space to watch given temporary layoffs as a share of unemployed remains relatively high at 59.5% (down from 78.3% in April and compared with 13.8% in February). To the extent workers exit temporary layoffs to return to work, the expansion should experience a faster liftoff. On the flip side, the number of people on permanent layoff rose by 588,000, to 2.9 million. The share of workers on permanent layoff has been creeping higher, hitting 16.2% and up from 10.9% in May.

Will the economy sustain this pace of job recovery? We do not think so. That's because the economy is not out of the woods yet. More normalization should be expected, but it will likely face bouts of hiccups based on recent state-level spikes in the virus. Across the U.S., 52,609 new infections were reported on July 1--the largest single day total since the start of the pandemic. Openings have been partially rolled back ahead of July 4 weekend. Mobility data is rolling over on some key southern states that have seen a surge. Momentum is slowing in people-facing service sector in these states.

Chart 2

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Chart 3

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The recent rise in infections is likely to set back the improvement, even without a state-mandated complete lockdown. The unemployment claims report--which provides a more timely labor market picture--showed that initial claims for the week ending June 27 were still high at 1.45 million, and the rapid decline through May and early June has started to level off at this high level. Multiple explanations have been floated: it could be a backlog problem as the media reports, it could also reflect new jobs lost from businesses not able to continue holding on, or perhaps the dynamic from the expiring eight-week employment guarantees associated with the bulk of Payment Protection Program (PPP) loans is kicking in.

Fear of the virus will keep consumers at bay in several states in the coming weeks, likely taking further wind from the related sector sales. The uncertainty level remains high absent effective virus control, and the large unemployment gap remains. Along with the continuing shedding of state workers, the recovery will likely require another robust fiscal package focused on unemployment insurance extension and state relief.

Table 1

Nontraditional Data Comparison (February - Pre-COVID-19 and June - Post-COVID-19)
Hotel and entertainment industry
Period Year on year (%) Period Year on year (%)
Hotel occupancy Week of June 14-20 (41.8) Week of Feb. 22-29 (1.7)
Hotel average daily rate Week of June 14-20 (31.7) Week of Feb. 22-29 1.6
Hotel revenue per room Week of June 14-20 (60.3) Week of Feb. 22-29 (0.2)
Box Office Mojo Week of June 19-25 (99.8) Week of Feb. 21-27 17.5
Open table Week of June 29 (62.2) Week of Feb. 28 3
Retail online transactions--revenue Week ending June 30 91 Week ending April 3 23
Retail online transactions--orders Week ending June 30 104 Week ending April 3 39
SBA weekly lending reports Week of June 21-27 (11.70) Week of Feb. 22-28 (11.7)
Google community mobility reports (retail and recreation) Week ending June 27 (15) Week ending Feb. 28 6.86
Google community mobility reports (grocery and pharmacy) Week ending June 27 (1) Week ending Feb. 28 2.86
Google community mobility reports (parks) Week ending June 27 57 Week ending Feb. 28 12.71
Commodity data
Period Year on Year Period Year on year (%)
Coal production Week ending June 20 -32.3% Week ending Feb. 22 (0.99)
Crude production Week ending June 28 -9.8% Week ending Feb. 21 7.4
Rotary rig count, Baker Hughes, oil Week ending June 27 -76.0% Week ending Feb. 15 (21.0)
Energy consumption Week ending June 21 -7% Week ending Feb. 15 (21)
Gasoline prices Week ending June 22 -22.3% Week ending Feb. 17 4.8
Raw steel production Week ending June 27 -33.4% Week ending Feb. 29 0.31
Business and consumer sentiment
Period Index Period Index
Philadelphia Fed General Business Conditions Index Survey was conducted the week of June 8-15 27.5 Survey resuts data received through Feb. 20 36.7
Empire State General Business Conditions Index Survey was conducted the week of June 2-9 -0.2 Survey was conducted until Feb. 15 12.9
Rasmussen Consumer Index Survey was done for June 109.8 Survey was done for February 143.9
Labor market data
Period Number of claims (mil.) Period Number of claims (mil.)
Intial claims Week ending June 27 1.427 Week ending Feb. 22 0.220
Note: Google Community Trends data is the % change from Jan. 3 to Feb. 6 baseline (seven-day moving average). Source: U.S. employment and Training Administration, Energy Information Administration, American Iron and Steel Institute, Open Table App, Rasmussen reports, STR, Baker-Hughes rig count, Box Office Mojo and ccinsight.

Table 2

Data Snapshot
Review of economic indicators released in the past two weeks (June 22, 2020 - July 2, 2020)
Latest period Jun-20 May-20 Apr-20 Level year ago % year-over-year
Labor market
Jobless claims (four-week moving average, '000s) 27-Jun-20 1,504 2,288 5,040 221
Unemployment rate (%) June 11.1 13.3 14.7 3.7
Nonfarm payrolls (change in '000s) June 4,800 2,699 (20,787) 182
Private nonfarm payrolls (change in '000s) June 4,767 3,232 (19,835) 180
Average hourly earnings, all employees (% change) June (1.2) (1.0) 4.7 5.0
Hours worked June 34.5 34.7 34.2 34.4
ADP employment (change in '000s) June 2,369 3,065 (19,409) 165
Participation rate (%) June 61.5 60.8 60.2 63.0
Consumer spending and confidence
Consumer Confidence Index (Conference Board) June 98.1 85.9 85.7 124.3
Personal income (m/m, % change) May (4.2) 10.8 7.0
Personal disposable income (m/m, % change) May (4.9) 13.1 8.8
Consumer spending (m/m, % change) May 8.2 (12.6) -9.3
Personal savings rate (%) May 23.2 32.2 7.8
Consumer Sentiment Index (University of Michigan) June 78.1 72.3 71.8 98.2
Business activity and sentiment
Durable goods order (m/m, % change) May 15.8 (18.1) (17.9)
ISM Manufacturing Index (Level) June 52.6 43.1 41.5 51.6
Housing and construction
New home sales ('000s) May 676 580 600
Pending home sales (%, m/m) May 44.3 (21.8) (5.1)
Construction spending (%, m/m) May (2.1) (3.5) 0.3
External sector
Trade balance of goods and services ($ bil.) May (54.6) (49.8) (51.3)
Exports goods and services ($ bil.) May 144.5 151.1 212.9
Imports goods and services ($ bil.) May 199.1 200.9 264.1
Prices
PCE Price Index (m/m % change) May 0.1 (0.5) 0.5
Core PCE Price Index (m/m % change) May 0.1 (0.4) 1.0
Source: US Bureau of Labor Statistics, US Bureau of Economic Analysis, US Census Bureau, Institute for Supply Management, ADP Research Institute

Table 3

Economic Release Calendar
Date Release For Consensus forecast Previous
6-Jul ISM--Nonmanufacturing index Jun 49.3 45.4
8-Jul Consumer credit ($ bil.) May (18) (68.8)
9-Jul Initial claims, week of 7/4/2020 ('000s) Initial 1,200 N/A
Wholesale sales (%) May 4.5 (16.9)
10-Jul PPI (%) Jun 0.4 0.4
PPI (excluding food and energy) (%) Jun 0.1 (0.1)
13-Jul Treasury budget (bil. $) Jun (700) (398.8)
14-Jul CPI (%) Jun 0.4 (0.1)
CPI (excluding food and energy) (%) Jun 0.1 (0.1)
15-Jul Empire State Index Jul 5.5 -0.2
Export Price Index (%) Jun 0.8 0.5
Import Price Index (%) Jun 0.7 1.0
Industrial production (%) Jun 3.4 1.4
Capacity utilization (%) Jun 67.0 64.8
16-Jul Retail sales (%) Jun 4.0 17.7
Retail sales (excluding auto) (%) Jun 3.5 12.4
Philadelphia Fed Index Jul 20.0 27.5
Business inventories (%) May (1.5) (1.3)
17-Jul Housing starts (mil.) Jun 1.148 0.974
University of Michigan Consumer Sentiment (prelim) Jul 80.0 78.1

The views expressed here are the independent opinions of S&P Global's economics group, which is separate from, but provides forecasts and other input to, S&P Global Ratings' analysts. The economic views herein may be incorporated into S&P Global Ratings' credit ratings; however, credit ratings are determined and assigned by ratings committees, exercising analytical judgment in accordance with S&P Global Ratings' publicly available methodologies.

U.S. Chief Economist:Beth Ann Bovino, New York (1) 212-438-1652;
bethann.bovino@spglobal.com
U.S. Senior Economist:Satyam Panday, New York + 1 (212) 438 6009;
satyam.panday@spglobal.com
Research Contributor:Arun Sudi, CRISIL Global Analytical Center, an S&P affiliate, Mumbai

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