Another Massive Jobless Claims Number Report Despite Active Efforts for the Economy to Reopen

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Economic Report Monitor #41
June 11th, 2020


The market sells off on another large initial jobless claims number. Initial unemployment claims increased 1.542 million last week even though states have already begun the reopening process. The large difference in the jobs report number and the claims numbers speaks to the unpreparedness of the system to handle the mass forced layoffs. Continued unemployment claims fell again but only slightly. A drop of -339,000 takes the total to 20.9 million, just barely off its peak in early May. In a more optimistic tone, May 23rd data showed a -1.2 million drop in individuals claiming Pandemic Unemployment Assistance to 9.7 million. All eyes on continuing claims data (pictured above) to see if the labor market recovery will gain speed.

Following CPI data yesterday, the Producer Price Index (PPI) report came out for May. The broad index increased by 0.4% disguising some other volatile segments. Food goods saw a 6.0% increase, a trend reflecting the food CPI from the day before. Meat prices increased a whopping 40.4% in one month as supply chain issues escalate. Energy prices reversed a three-month losing streak to increase by 4.5%. Transportation and warehousing services increased by 1.5%. The segment most impactful here was a 12.2% increase in the transportation of passengers. The report continues to document wildly mixed results with certain commodities seeing steep drops and others seeing sharp inclines. Overall, there is a common deflationary theme as the total index sits at a YoY drop of -0.8%. Combined with the CPI report, these price indexes reinforce the Federal Reserve's dovish position that was confirmed in the June FOMC meeting.

An initial more in-depth view of COVID-19's impact on the service economy was outlined in the 2020 Q1 Quarterly Services Report. It's important to note that these data encapsulated the first 3 months of 2020 meaning that the drops are only a result of 1 month (March) of COVID-19 and 2 normal operating months. As expected, there were massive disruptions in industries labeled non-essential. Arts, entertainment, and recreation businesses saw revenue fall -11.3% with the largest drop seen in promoters, -35.1%. Amusement parks and gambling industries saw revenues fall -17.5% and -10.6%. Hospitals, despite being heavily involved in the fight, saw revenues drop -7.5%. Other healthcare and social assistance industries fair better with most slightly lower and some flat. Professional services fared well, especially those that could work with a remote scenario, down just -0.2%. Real estate was flat at up 0.6% while renting and leasing of vehicles was more impacted, down -6.7%. Air transportation fell -17.9% while truck transportation survived, down just -0,1%. The report continues to push that narrative that there are winners and losers in the COVID-19 economy. Some of that line is drawn between what is nonessential and essential, and some of it is drawn between what falls under the social distancing guidelines and what can't. These circumstances make the economic slowdown especially unique that will have unique consequences for the economy as the interconnectedness of industries is tested.

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