by Calculated Risk on 9/07/2020 12:37:00 PM

It is possible to consider the impact of the pandemic on employment as being similar to a large number of simultaneous worker strikes, and a concurrent severe recession.

When a strike happens, a large number of jobs are immediately lost.  And then, when the strike is settled, the jobs are added back to the economy.

An example would be the August 1983 telecommunications strike when close to 700,000 went on strike.  This led to a sharp decline in employment in the August 1983 employment report.   The strike ended in late August 1983, and the approximately 700,000 jobs were added back in the September employment report.  A true "V" shaped employment recovery.

In March and April of 2020, close to 22.2 million jobs were lost.  A large number of these jobs were similar to a "strike", and the employees were able to return to work very quickly.

IMPORTANT: Of course, unlike a labor settlement, returning to work during a pandemic has serious health risks with over 30,000 Americans dying from COVID-19 in August alone.   And many more with serious health issues, see this story in the Eugene, Oregon Register-Guard: Marist alum Natalie Hakala went from collegiate runner to coronavirus long-hauler

Click on graph for larger image.

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

Some workers were able to return to the jobs fairly quickly. By August, about 10.6 million workers had returned to their jobs (almost half of the jobs lost in March and April).

This would be similar to a large number of simultaneous worker strikes, and then the workers returning to work when a settlement is reached.

However, these returning workers mask the concurrent severe recession.

This graph shows permanent job losses as a percent of the pre-recession peak in employment through the August report.

This data is only available back to 1994, so there is only data for three recessions. Note that the permanent jobs losses data is from the CPS (Household survey), and the jobs data in the first graph is from the CES (Establishment survey).

In August, the number of permanent job losses increased sharply to 3.411 million from 2.877 million in July.  In addition, there have been a number of large company layoff announcements recently (some of these layoffs are happening as the CARES act corporate bailouts expire).    So the number of permanent job losers will probably increase sharply in the coming months.

Looking back at previous recessions, usually permanent job losers account for about 60% of total jobs lost in the early stages of the recession.   It was a much smaller percentage this time since many of the initial job losses were temporary (more like a strike).   My guess is about half the remaining jobs lost are already due to the severe recession - and the number is growing quickly.

Note: There is also some distortion from temporary decennial Census hiring too.  There were 288 thousand temporary Census workers in August (238 thousand hired in August alone).   This boosted employment, especially in August - and will subtract from employment in a few months.

Treating the current situation as a combination of simultaneous strikes, and a concurrent severe recession explains the fairly rapid employment increases, and also the decline in the unemployment rate.  However, this also suggests there are only a few million more jobs that can be gained in the short term - until we address the rapidly increasing severe recession.

by Calculated Risk on 9/06/2020 06:59:00 PM

The US is now mostly reporting over 700,000 tests per day. 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 734,990 test results reported over the last 24 hours.

There were 33,767 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 4.6% (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 9/05/2020 06:39:00 PM

The US is now mostly reporting over 700,000 tests per day. 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 802,252 test results reported over the last 24 hours.

There were 44,636 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 5.6% (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 9/05/2020 07:53:00 AM

The key economic report this week is the August Consumer Price Index (CPI).

----- Monday, September 7th -----
All US markets will be closed in observance of the Labor Day holiday.

----- Tuesday, September 8th -----
6:00 AM: NFIB Small Business Optimism Index for August.

3:00 PM: Consumer Credit from the Federal Reserve.

----- Wednesday, September 9th -----
7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

10:00 AM ET: Job Openings and Labor Turnover Survey for July from the BLS.

This graph shows job openings (yellow line), hires (purple), Layoff, Discharges and other (red column), and Quits (light blue column) from the JOLTS.

Jobs openings increased in June to 5.889 million from 5.371 million in May.

The number of job openings (yellow) were down 18% year-over-year, and Quits were down 25% year-over-year.

----- Thursday, September 10th -----
8:30 AM: The initial weekly unemployment claims report will be released. The early consensus is for a 800 thousand initial claims, down from 881 thousand the previous week.

8:30 AM: The Producer Price Index for August from the BLS. The consensus is for a 0.2% increase in PPI, and a 0.2% increase in core PPI.

----- Friday, September 11th -----
8:30 AM: The Consumer Price Index for August from the BLS. The consensus is for a 0.3% increase in CPI, and a 0.2% increase in core CPI.

by Calculated Risk on 9/04/2020 07:17:00 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 902,125 test results reported over the last 24 hours.

There were 51,513 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 5.7% (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 9/04/2020 02:32:00 PM

From the Association of American Railroads (AAR) Rail Time Indicators. Graphs and excerpts reprinted with permission.

Does slow and steady really win the race? U.S. railroads might find out, because slow and steady (with a long way to go) generally describes the improvements in U.S. carload traffic in recent months.

Total U.S. rail carloads fell 14.9% in August 2020 from August 2019. their 19th straight year-over year decline. That’s not great, obviously, but it’s the smallest percentage decline since March 2020. ... Intermodal, though, is doing great. ... Relatively strong consumer spending on goods is helping intermodal.
emphasis added

Click on graph for larger image.

This graph from the Rail Time Indicators report shows the six week average of U.S. Carloads in 2018, 2019 and 2020:

U.S. railroads originated an average of 224,557 total carloads per week in August 2020. That’s the lowest weekly average for total carloads for August since sometime before 1988, when our data begin. It’s also down 14.9% from August 2019. Still, there’s progress: August 2020 had the highest weekly average carloads and the smallest year-over-year percentage decline in five months.

In the first eight months of 2020, total carloads were down 16.0%, or 1.42 million carloads, from 2019.

The second graph shows the six week average of U.S. intermodal in 2018, 2019 and 2020: (using intermodal or shipping containers):

U.S. intermodal volume averaged 280,739 containers and trailers per week in August 2020 — the most since October 2018, the fifth most for any month in history, and up 3.0% over August 2019. The last time intermodal had a year-over-year monthly increase of any size was January 2019. ... total U.S. consumer spending is still well below pre-pandemic levels, but spending on goods (as opposed to services) is actually above pre-pandemic levels. That’s sure to be helping rail intermodal volumes.

Note that rail traffic was weak prior to the pandemic.

by Calculated Risk on 9/04/2020 12:22:00 PM

From Merrill Lynch:

We continue to track 2Q GDP at -31.7% qoq saar, unchanged from the second estimate. 3Q GDP tracking is now at 25% qoq saar, up from 19% last week owing to strong exports and auto sales. [Sept 4 estimate]
emphasis added

From the NY Fed Nowcasting Report

The New York Fed Staff Nowcast stands at 15.6% for 2020:Q3 and 7.3% for 2020:Q4. [Sept 4 estimate]

And from the Altanta Fed: GDPNow

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2020 is 29.6 percent September 3, up from 28.5 percent on September 1 [Sept 3 estimate]

It is important to note that GDP is reported at a seasonally adjusted annual rate (SAAR).  A 25% annualized increase in Q3 GDP, is about 5.7% QoQ, and would leave real GDP down about 5.1% from Q4 2019.

The following graph illustrates this decline.

Click on graph for larger image.

This graph shows the percent decline in real GDP from the previous peak (currently the previous peak was in Q4 2019).

This graph is through Q2 2020, and real GDP is currently off 10.2% from the previous peak.  For comparison, at the depth of the Great Recession, real GDP was down 4.0% from the previous peak.

The black arrow shows what a 25% annualized increase in real GDP would look like in Q3.

Even with a 25% annualized increase (about 5.7% QoQ), real GDP will be down about 5.1% from Q4 2019; a larger decline in real GDP than at the depth of the Great Recession.

by Calculated Risk on 9/04/2020 09:21:00 AM

The labor market swings have been huge, and the August employment report was at expectations of 1.4 million jobs added, although private employment was below expectations.

Leisure and hospitality added another 174 thousand jobs in August, following 4 million jobs added in May, June and July. Leisure and hospitality lost 8.3 million jobs in March and April, so about 50% of those jobs were added back in May, June, July and August.

Earlier: August Employment Report: 1.4 Million Jobs Added, 8.4% Unemployment Rate

In August, the year-over-year employment change was minus 10.25 million jobs.

As expected, there were 238 thousand temporary Decennial Census workers hired (and included in this report). These jobs will be lost in a few months. "A job gain in federal government (+251,000) reflected the hiring of 238,000 temporary 2020 Census workers."

Permanent Job Losers

Click on graph for larger image.

This graph shows permanent job losers as a percent of the pre-recession peak in employment through the August report. (ht Joe Weisenthal at Bloomberg)

This data is only available back to 1994, so there is only data for three recessions.

In August, the number of permanent job losers increased sharply to 3.411 million from 2.877 million in July.

Prime (25 to 54 Years Old) Participation

Since the overall participation rate has declined due to cyclical (recession) and demographic (aging population, younger people staying in school) reasons, here is the employment-population ratio for the key working age group: 25 to 54 years old.

The prime working age will be key in the eventual recovery.

The 25 to 54 participation rate increased slightly in August to 81.4%, and the 25 to 54 employment population ratio increased to 75.3%.

Part Time for Economic Reasons

From the BLS report:

"The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) declined by 871,000 to 7.6 million in August, reflecting a decrease in the number of people who worked part time due to slack work or business conditions (-1.1 million)."

The number of persons working part time for economic reasons decreased in August to 7.572 million from 8.443 million in July.

These workers are included in the alternate measure of labor underutilization (U-6) that decreased to 14.2% in August. This is down from the record high in April 22.8% for this measure since 1994.

Unemployed over 26 Weeks

This graph shows the number of workers unemployed for 27 weeks or more.

According to the BLS, there are 1.501 million workers who have been unemployed for more than 26 weeks and still want a job.

This will increase sharply in September or October - since the largest number of layoffs were in April - and will be a key measure to follow during the recovery.

Summary:

The headline monthly jobs number was at expectations but the previous two months were revised down 39,000 combined.  The headline unemployment rate decreased to 8.4%.

by Calculated Risk on 9/04/2020 08:41:00 AM

From the BLS:

Total nonfarm payroll employment rose by 1.4 million in August, and the unemployment rate fell to 8.4 percent, the U.S. Bureau of Labor Statistics reported today. These improvements in the labor market reflect the continued resumption of economic activity that had been curtailed due to the coronavirus (COVID-19) pandemic and efforts to contain it. In August, an increase in government employment largely reflected temporary hiring for the 2020 Census.
...
In August, the unemployment rate declined by 1.8 percentage points to 8.4 percent, and the number of unemployed persons fell by 2.8 million to 13.6 million. Both measures have declined for 4 consecutive months but are higher than in February, by 4.9 percentage points and 7.8 million, respectively.
...
The change in total nonfarm payroll employment for June was revised down by 10,000, from +4,791,000 to +4,781,000, and the change for July was revised down by 29,000, from +1,763,000 to +1,734,000. With these revisions, employment in June and July combined was 39,000 less than previously reported.
emphasis added

Click on graph for larger image.

The first graph shows the year-over-year change in total non-farm employment since 1968.

In August, the year-over-year change was negative 10.25 million jobs.

Total payrolls increased by 1.4 million in August.

Payrolls for June and July were revised down 39 thousand combined.

The second graph shows the job losses from the start of the employment recession, in percentage terms.

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

The third graph shows the employment population ratio and the participation rate.

The Labor Force Participation Rate increased to 61.7% in August. This is the percentage of the working age population in the labor force.

The Employment-Population ratio increased to 56.5% (black line).

I'll post the 25 to 54 age group employment-population ratio graph later.

The fourth graph shows the unemployment rate.

The unemployment rate decreased in August to 8.4%.

This was at consensus expectations of 1.4 million jobs added, and June and July were revised down by 39,000 combined.

I'll have much more later …

by Calculated Risk on 9/04/2020 07:00:00 AM

Note: Both Black Knight and the MBA (Mortgage Bankers Association) are putting out weekly estimates of mortgages in forbearance.

This data is as of September 1st.

From Forbearances Improve Slightly

After holding flat for the last couple of weeks, the total number of mortgages in active forbearance saw stronger than expected improvement, with the number of active forbearance plans declining by 147k (-4%) over the past week.

Active forbearances are now down about 1M (-21%) since the peak in May.

According to Black Knight’s McDash Flash Forbearance Tracker, as of September 1, 3.8M mortgages remain in active COVID-19 related forbearance plans, representing 7.1% of all active mortgages, down from 7.4%. Together, they represent $804 billion in unpaid principal. Of these, 75% have had their terms extended
...
As we covered in the most recent Mortgage Monitor report, forbearance starts have shown little impact from the reduction in expanded unemployment benefits thus far. Through the first four weeks of August, forbearance starts were down 13% M/M from the comparable 4-week period in July. September may provide the true test, though, as impacted borrowers were still receiving full expanded unemployment benefits up through July 31.

More than 2M COVID-19-related forbearance plans are now set to expire in September, setting up a significant volume of extension/removal activity in late September/early October, reminiscent to what was seen in late June and early July, albeit to a slightly lesser degree.
emphasis added

Click on graph for larger image.

CR Note: I'm still expecting another disaster relief package soon, but we might see an increase in forbearance activity in the coming weeks as we wait for additional relief.