We anticipate that there will be no increase in total employment for July following two strong months of worker recalls when the U.S. employment data is released on Friday.
As the pandemic has spread and the economy has paused, we expect Friday’s jobs report to show no increase in total employment.
This is mostly because of the intensification of the pandemic across the South, Southwest and California, as well as the pauses and rollbacks in the economy across much of the country.
For this reason, we think that there is a risk of a negative print in the July employment report, and we do anticipate further job losses in August.
Based on our research using the latest alternative and near-real time data, the economy begin to level off in mid- to late June and has stalled out since.
The data in hiring and consumption is clear that until there is a vaccine, the economy will be characterized by a series of stop and start episodes driven by the intensity of infections around the country.
As such, we anticipate that the household portion of the survey, which the Bureau of Labor Statistics uses to produce the unemployment rate, will reflect that and the unemployment rate will increase to 11.5%.
Source: Federal Reserve Bank of St. Louis
Reading employment in near real time
Like many, we have turned to a spate of alternative data sets in recent months to create novel forecasts of activity in our pandemic economy. The St. Louis Fed published a research note this week that made a fairly persuasive case that the Homebase data, which focuses on individuals and hours worked in small and medium-size businesses, shares a strong correlation with the monthly Current Population Survey.
That note emphasized that since June 12, the improvement in the labor market slowed down and then reverted. The Homebase data implied that there were fewer individuals working in small and medium-sized firms in July compared to June, thus our emphasis on downside risk to our forecast of zero change in total employment in the July report.
Moreover, the real-time spending data since then has continued to drift downward, which tends to imply that the August data will turn negative.
Within Friday’s jobs report, the focus is likely to be on the median duration of unemployment, which has increased from 2 weeks to 13.6 weeks over the past three months; hours worked; and the individual data points within the service sector hiring categories.
For more information on how the coronavirus is affecting midsize businesses, please visit the RSM Coronavirus Resource Center.
