by Calculated Risk on 9/03/2020 09:00:00 PM

My August Employment Preview

Goldman August Payrolls Preview

Friday:
• At 8:30 AM ET, Employment Report for August. The consensus is for 1.40 million jobs added, and for the unemployment rate to decrease to 9.8%.

Click on graph for larger image.

This graph shows the job losses from the start of the employment recession, in percentage terms through July.

The current employment recession is by far the worst recession since WWII in percentage terms, and the worst in terms of the unemployment rate.

by Calculated Risk on 9/03/2020 06:28:00 PM

The US is now mostly reporting over 700,000 tests per day (fewer recently). Based on the experience of other countries, the percent positive needs to be well under 5% to really push down new infections, so the US still needs to increase the number of tests per day significantly (or take actions to push down the number of new infections).

There were 723,524 test results reported over the last 24 hours.

There were 44,294 positive tests.

See the graph on US Daily Deaths here.

Click on graph for larger image.

This data is from the COVID Tracking Project.

The percent positive over the last 24 hours was 6.1% (red line).

For the status of contact tracing by state, check out testandtrace.com.

And check out COVID Exit Strategy to see how each state is doing.

The second graph shows the 7 day average of positive tests reported.

The dashed line is the June low.

Note that there were very few tests available in March and April, and many cases were missed (the percent positive was very high - see first graph).

By June, the percent positive had dropped below 5% (lower than today).  If people stay vigilant, the number of cases might drop to the June low by the end of September (that would still be a large number of new cases, but progress).

by Calculated Risk on 9/03/2020 03:54:00 PM

A few brief excerpts from a note by Goldman Sachs economist Spencer Hill:

We estimate nonfarm payroll growth rose 1.9mn in August, above consensus of +1.35mn. The resurgence of the coronavirus did not produce a meaningful increase in layoffs in the Sun Belt based on jobless claims data, and high-frequency surveys replicating the BLS approach indicate robust August job gains. ... We also expect a 0.25mn boost from Census canvassing activities.
…
We estimate the unemployment rate declined by 0.4pp to 9.8%
emphasis added

by Calculated Risk on 9/03/2020 12:57:00 PM

On Friday at 8:30 AM ET, the BLS will release the employment report for August. The consensus is for an increase of 1.4 million non-farm payroll jobs, and for the unemployment rate to decrease to 9.8%.

There will be at least two distortions to the August report. (For details, see: August Employment Report: Comments on Temporary Decennial Census Hiring and Education). The decennial Census will add 237,800 temporary jobs (the jobs data should be reported ex-Census to show the underlying trend). Also, due to the delays in school openings, the usual number of educators were probably not hired in August. The BLS model will expect about 415,000 seasonal education jobs added in August. If fewer jobs are added, the BLS will report that education jobs were lost Seasonally Adjusted. For example, if only 115,000 jobs are added in August, then the BLS will report around 300 thousand education jobs lost.

The ADP employment report showed a gain of 428,000 private sector jobs, far below the consensus estimate of 900 thousand jobs.  The ADP report hasn't been very useful in predicting the BLS report, but this suggests the BLS report could be weaker than expected.

The ISM manufacturing employment index increased in August to 46.3% from 44.3% in July, but still well below 50.   This would suggest around 40,000 manufacturing jobs lost in August - although ADP showed 9,000 manufacturing jobs added.

The ISM Services employment index increased in August to 47.9%, from 42.1% in July, and is still below 50. This would suggest little change in service jobs lost in August. Combined, the ISM surveys suggest around 40,000 private sector jobs lost in July.

The weekly claims report showed a high number total continuing unemployment claims during the reference week, although this was down about 2 million from the reference week in July.

There are other indicators that analysts are looking at - like Homebase hours worked (see Ernie Tedeschi comments). Ernie estimates 800 thousand jobs added (SA) and for the unemployment rate to decline to 9.4%. This doesn't include temporary decennial hiring, and also excludes any distortion from education delays.

Merrill Lynch forecasts: "August nonfarm payrolls are likely to rise by 1.2mn and the unemployment rate should improve to 9.6%, falling back down to single digit territory."

• Conclusion: There is a wide range of estimates for the August report.  In general, the employment related data has been weaker than expected, and  I'll take the under, ex-Census.

by Calculated Risk on 9/03/2020 12:29:00 PM

From HotelNewsNow.com: STR: US hotel results for week ending 29 August

U.S. hotel occupancy decreased slightly for the second consecutive week, according to the latest data from STR.

23-29 August 2020 (percentage change from comparable week in 2019):

• Occupancy: 48.2% (-27.7%)
• Average daily rate (ADR): US$98.39 (-23.2%)
• Revenue per available room (RevPAR): US$47.38 (-44.5%)

The industry sold 237,000 fewer room nights than the previous week, which represented a demand decrease of 1.3%. Week-over-week demand improvements were a constant since mid-April, but as summer ends and leisure travel fades, hotel performance gains have flattened.
emphasis added

The following graph shows the seasonal pattern for the hotel occupancy rate using the four week average.

Click on graph for larger image.

The red line is for 2020, dash light blue is 2019, blue is the median, and black is for 2009 (the worst year probably since the Great Depression for hotels).

The leisure travel season usually peaks at the beginning of August, and then the occupancy rate typically declines sharply in the Fall.  So "flat" isn't terrible.

With so many schools closed, the leisure travel season might have lasted longer than usual this year, but it is unlikely business travel will pickup significantly in the Fall.

Note: Y-axis doesn't start at zero to better show the seasonal change.

by Calculated Risk on 9/03/2020 10:26:00 AM

Earlier: Weekly Initial Unemployment Claims increase to 833,352 NSA

Note: The DOL changed their seasonal adjustment method, so to compare to the previous week, we need to use the NSA data.  See Technical Note on Weekly Unemployment Claims

The Not Seasonally Adjusted (NSA) claims increased to 833,352 from 825,761 the previous week. These are directly comparable since the Seasonal Adjustment Factor was identical for both weeks.

This was the 24th consecutive week with extraordinarily high initial claims.

More importantly, continued claims are still extremely high (second graph below).

The following graph shows regular initial unemployment claims (blue) and PUA claims (red) since early February (all NSA).

Click on graph for larger image.

Initial claims, including Pandemic Unemployment Assistance (PUA) are still close to 1.6 million per week.

The worst week during the great recession was 665,000 (SA). So total initial weekly claims are still more than 900 thousand higher than the worst week of the great recession!

We are probably seeing some layoffs related to the higher level of COVID cases and also from the end of some Payroll Protection Programs (PPP).

The second graph shows all person receiving unemployment insurance benefits on all programs. Note that this data is released with a two week lag, and is not seasonally adjusted.

There are typically around 2 million people receiving benefits from the various programs (mostly regular unemployment insurance).

As of the release this morning, there were still 29 million people receiving benefits as of August 15th.

This was a very disappointing weekly report. Initial claims increased (NSA), there was a sharp increase in PUA initial claims (might be a data dump), and the total continued claims increased - and remains at a very high level.

by Calculated Risk on 9/03/2020 10:06:00 AM

The August ISM Services index was at 56.9%, down from 58.1% in June. The employment index increased to 47.9%, from 42.1%. Note: Above 50 indicates expansion, below 50 contraction.

From the Institute for Supply Management: Services PMI™ at 56.9%; August 2020 Services ISM® Report On Business®

Business Activity Index at 62.4%; New Orders Index at 56.8%; Employment Index at 47.9%; Supplier Deliveries Index at 60.5%

Economic activity in the services sector grew in August for the third month in a row, say the nation's purchasing and supply executives in the latest Services ISM® Report On Business®.

The report was issued today by Anthony Nieves, CPSM, C.P.M., A.P.P., CFPM, Chair of the Institute for Supply Management® (ISM®) Services Business Survey Committee: "The Services PMI™ (formerly the Non-Manufacturing NMI®) registered 56.9 percent, 1.2 percentage points lower than the July reading of 58.1 percent. This reading represents growth in the services sector for the third straight month and the 125th time in the last 127 months, with the exception of April's and May's contraction.
emphasis added

The employment index showed ongoing weakness with the sixth consecutive reading below 50.

by Calculated Risk on 9/03/2020 08:55:00 AM

From the Department of Commerce reported:

The U.S. Census Bureau and the U.S. Bureau of Economic Analysis announced today that the goods and services deficit was $63.6 billion in July, up $10.1 billion from $53.5 billion in June, revised.

July exports were $168.1 billion, $12.6 billion more than June exports. July imports were $231.7 billion, $22.7 billion more than June imports
emphasis added

Click on graph for larger image.

Both exports and imports increased in June.

Exports are down 20% compared to July 2019; imports are down 11% compared to July 2019.

Both imports and exports decreased sharply due to COVID-19, and have now bounced back (imports more than exports),

The second graph shows the U.S. trade deficit, with and without petroleum.

The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products.

Note that the U.S. exported a slight net positive petroleum products in recent months.

Oil imports averaged $40.60 per barrel in July, up from $35.34 per barrel in June, and down from $60.11 in July 2019.

The trade deficit with China decreased to $31.6 billion in July, from $32.7 billion in July 2019.

by Calculated Risk on 9/03/2020 08:39:00 AM

Note: The DOL has changed their seasonal adjustment method, so to compare to the previous week, we need to use the NSA data.  See Technical Note on Weekly Unemployment Claims

The Not Seasonally Adjusted (NSA) claims increased to 833,352 from 825,761 the previous week. These are directly comparable since the Seasonal Adjustment Factor was identical for both weeks.

The DOL reported:

In the week ending August 29, the advance figure for seasonally adjusted initial claims was 881,000, a decrease of 130,000 from the previous week's revised level. The previous week's level was revised up by 5,000 from 1,006,000 to 1,011,000. The 4-week moving average was 991,750, a decrease of 77,500 from the previous week's revised average. The previous week's average was revised up by 1,250 from 1,068,000 to 1,069,250.
emphasis added

The previous week was revised up.

This does not include the 759,482 initial claims for Pandemic Unemployment Assistance (PUA) that was up from 607,808 the previous week.

The following graph shows the 4-week moving average of weekly claims since 1971.

Click on graph for larger image.

The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims decreased to 991,750.

The previous week was revised up.

The second graph shows seasonally adjust continued claims since 1967 (lags initial by one week).

At the worst of the Great Recession, continued claims peaked at 6.635 million, but then steadily declined.

Continued claims decreased to 13,254,000 (SA) from 14,492,000 (SA) last week and will likely stay at a high level until the crisis abates.

Note: There are an additional 13,570,327 receiving Pandemic Unemployment Assistance (PUA) that increased from 10,972,770 the previous week. This is a special program for business owners, self-employed, independent contractors or gig workers not receiving other unemployment insurance.

by Calculated Risk on 9/02/2020 07:54:00 PM

Thursday:
• At 8:30 AM ET, The initial weekly unemployment claims report will be released. The early consensus is for a 950 thousand initial claims, down from 1.006 million the previous week.

• At 8:30 AM, Trade Balance report for July from the Census Bureau. The consensus is for the U.S. trade deficit to be at $52.3 billion in July, from $50.7 billion in June.

• At 10:00 AM, ISM Services Index for August.