As part of our 5 Keys to Peak Season initiative, HARDI is releasing a new Market Intelligence content stream called Green Shoots. As in the natural world where green shoots and budding leaves indicate the start of spring, economic green shoots suggest an impending economic revitalization. Over the next six months, subscribers to Green Shoots will receive weekly updates on the economic indicators that matter most to the industry. What follows in the paragraphs below is a teaser sample of what subscribers can expect to receive when the Green Shoots series launches on June 8th.
Our economy was thrust into an economic coma to slow the spread of the COVID-19 virus. It worked, but more than 20 million people lost their jobs in the process. Putting a patient into a coma is risky and reserved for dire circumstances. Will they wake, and how long will it be until they can walk normally? In more normal times economists use the Bureau of Labor Statistics’ (BLS) monthly Employment Situation Report - or Jobs Report - to track the health of the economy. Unfortunately, the Jobs Report will not offer enough information for us to see how many of our 20 million unemployed neighbors are returning to the labor force during the back half of 2020.
The Jobs Report is released on the first Friday of the new month, and its headline output is the nation’s estimated unemployment rate. However, due to the timing of each Jobs Report release, the surveys conducted by the BLS that are the basis for the estimated unemployment rate are completed by the middle of the previous month. As a result, the reported unemployment rate does not capture any job losses or movements from the labor force that occur during the final weeks of a given month. In normal times, when the monthly movement of people into unemployment is a few hundred thousand, the reported unemployment rate does not differ significantly from the actual unemployment rate. Unfortunately, in our present state, where several million people are filing for unemployment each week, the reported unemployment rate differs significantly from the actual unemployment rate, meaning the monthly Jobs Report is not providing the Green Shoots-worthy early insights into the economic recovery that we desire.
Employment is the most important leading indicator for you to track, as employment growth leads to improved consumer confidence and improved business confidence. Employment growth would indicate the virtuous gears of the economy are starting to turn, meaning HARDI members can expect a better business outlook. The chart above, which shows the evolution of continuing unemployment claims over time, indicates that some of our neighbors have been able to return to work. Continuing claims are simply the number of unemployed Americans that continue to file for unemployment benefits. A decline in this number – as has happened in recent weeks – would suggest that people are going back to work. A related and equally encouraging development is that weekly initial unemployment claims have declined for eight consecutive weeks. Americans are losing their jobs each week at 10X the rate of earlier this year, but initial claims are on the decline in 40 of our 50 states. Continuing claims are declining in 39 states. The economic gears are starting to turn. Employment has a long way to go before it would be considered healthy, but this is the example of an economic Green Shoot that we are excited to watch grow.
Jobs Report Update: June 5th
This morning The Bureau of Labor Statistics released the May 2020 Jobs Report. In the lead-up to the Report’s release, the expert consensus held that the unemployment rate for May would increase to 19.8 percent (from 14.7 percent in April). In a surprising, and uplifting, turn of events, the May unemployment rate actually improved to 13.3 percent.
Nevertheless, as we outline in the paragraphs above, the Jobs Report is an inadequate scale for measuring the recovery of your markets. The average monthly job gain during the extraordinary 113 month economic expansion – which ended in February - was almost 200K. Following the February peak, the number of unemployed surged by roughly 18 million or 90X the previous average monthly change. Would your systems be stressed if they were asked to process 90X more transactions in a month? The monthly unemployment number should become more reliable in a few months. For now we get our best measurement of the pace of our recovery from this economic coma with the weekly claims report.
We are tracking for you the weekly initial unemployment claims and continuing unemployment claims. We have observed initial claims declining in 40 of our 50 states. Initial claims have to decline before continuing claims, so this is a good first step. 39 states are reporting lower continuing claims than their three week average, but the typical improvement is very modest. Some states are showing terrific improvement like Pennsylvania and Oklahoma, but a careful review of the individual weekly progress of the 50 states does not yet indicate a dramatic improvement of employment. Employment is the most important Green Shoot we are tracking for your recovery. As employment improves, business and consumer confidence will improve and the market’s response to warmer temperatures will be more predictable.