First Month of Lockdown Sees Unemployment Claims Rise 22 Million

Economic Report Monitor #16
April 16th, 2020

From Yahoo Finance

The 4th week of jobless claims brings more pain as employment sees another 5.25 million jobs shed last week. The total now reaches 22 million for the past four weeks with insured unemployment rising to 8.2% or 11,976,000. It's very likely that insured unemployment rate will reach double digits next week as the newest round of claims is added into the total. Was the previous week of 6.6 million the peak of jobless claims additions? It certainly feels like the lockdown can't get worse, and with conversations of reopening the economy starting, businesses are more likely to open than close. However, with the current state unemployment systems overloaded, there are still plenty of people waiting to get access to benefits. Once those pass through, there should be a flattening in weekly claim growth.

Census residential construction data show a steep -22.3% drop in housing starts in March as construction plans are halted. New permits also dropped -6.8% signaling further deterioration to come. Data points still are slightly above or at the same level as a year ago, so there hasn't been a complete collapse. Housing united under construction was just down -0.2% suggesting the outbreak hasn't delayed projects already in motion. This could delay a shortage in residential homes, but not for long if the lockdowns continue longer than expected. Right now, the movements look like a short term blip but could quickly materialize into something more structural if financial issues arise aside health issues.

Another Federal Reserve manufacturing survey saw declines worse than 2008 today as the Philadelphia Fed reported a -43.9 pt drop in its general business activity index to -56.6 pts. During the Great Recession, this indicator bottomed out around -40 pts. In new orders and shipments, 70.9% and 76.8% of firms reported decreased new orders and shipments, both index's lowest value ever. Prices paid and received were relatively stable at -9.3 pts and -10.6 pts, and most firms reported no change in prices. Price sentiment has yet to reach 2008 levels which bottomed around -40 pts as well. Employment plummeted as number of employees fell to -46.7 pts and average workweek fell to -54.5 pts. Across most manufacturing reports, the common trend continues to be employment dropping with general activity disappearing (new orders, shipments). Prices have only been marginally impacted. 

In the Philadelphia Fed survey, expectations for 6 months from now were optimistic. More than half of respondents see general business activity, shipments, and new orders improving in 6 months. The trend suggests firms are hopeful of seeing the robust, quick rebound that the Fed wrote about in its last meeting minutes. Capital expenditure expectations improved only slightly, from 12.0 pts to 12.4 pts, but only 15.9% of respondents saw it decreasing. Employment was less hopeful as both indexes fell slightly, and a majority of firms reporting expecting either no change or a decrease in number of employees and average workweek in 6 months. Regardless, it's good to see some optimism from manufacturing which will be important in a concerted effort to restart the economy.

Natural gas storage continued its building trend on current stockpiles and over historical measures. A total of 73 Bcf were added as the comparison versus last year increases slightly to 71.7% over and versus the five-year average to 21.4%. These levels remain despite Baker Hughes reporting a large disparity between US rig count in 2020 and 2019. The last rig count on April 9th, 2020 saw a -62 drop in overall operations to 602 rigs which is -420 lower than a year ago.