English (India)
10
May

USDJPY surged Fri on better than expected U.S. NFP job report despite suspense about Fed's NIRP

calendar 10/05/2020 - 04:00 UTC
  • Powell/Trump may not take the route of NIRP/ZIRP permanently as it would ultimately bring Japan/EU like deflation to the U.S. (‘Japanification’ of the U.S. economy)
  • The U.S. now needs fresh debt to pay-off or service its old debt (like a great Ponzi Scheme) and also to rebuild America after the corona carnage
  • Thus to attract angel investors (China, Japan/Asia, and Europe), the U.S. needs to keep its interest rate/bond yields/bond coupon rate in a positive zone; otherwise who will invest in Trumponomics?
  • USD is like a growth currency, while Yen, EUR or even Yuan is basically a funding currency; Japan is the ‘financier’ of the World as it has NIRP/ZIRP (negative/zero interest rate policy) back in the home

USDJPY closed around 106.67 in the U.S. session Friday, surged almost +0.36% on better than expected U.S. NFP job report despite suspense about Fed’ NIRP (Negative Interest Rate Policy). On early Asian Friday, USD was also buoyed as U.S.-China trade negotiators led by the USTR Lighthizer, Treasury Secretary Mnuchin, and Chinese VP Liu He held a concall on late Thursday (U.S. time) to discuss the progress of Phase One trade deal (after Trump’s renewed trade war narrative to punish China for ‘Wuhan virus incompetence’)

But USD jumped from the session low of 106.22 to almost the session high of 106.75 after better than expected U.S. NFP job report and the fact that almost 75% of the 21.37M unemployed workers due to COVID-19 disruptions are furloughed; i.e. temporary lay-offs to cope with the corona lockdown and to pocket more remunerations from the government than their average earnings, thanks to a generous payout by the U.S. Congress in addition to normal unemployment benefit.

But soon after the NFP jump. USD also slips from the session high to around 106.35 in a knee jerk reaction as the White House economic adviser Hassett clarified if Fed decides to push interest rate into negative; i.e. NIRP; the Trump admin would support it. Hassett said: If the Fed did decide to have negative interest rates, we will support it; but the White House doesn't want to advise the central bank what to do. We respect Fed independence.

Moreover, on mid-Friday, Fed announced a speech (webcast) by Chair Powell on 13th May discussing ‘current economic issues’. Soon after that, the Fed Fund Future Rate (FFR) flashed some probability of -0.25% (negative interest rate; i.e. the rate corridor maybe 0.00 to -0.25%. That is effective, the Fed rate (repo) will be at 0.00% while the reverse repo (RR) rate will be -0.25% to discourage banks to park their excess fund with the central bank to earn a risk-free decent return than lending the same to a risky entity, losing even the principal amount.

As there is a severe lack of quality and eligible borrower, the bank may be preferring the return of capital rather than return on capital. Thus the Fed may now follow its peer on the other side of Atlantic (ECB) and also on the other side of Pacific (BOJ) to some extent.

Actually, the FFR is flashing some probability of NIRP/ZIRP form Thursday (7th May) itself despite various Fed officials are downplaying it publicly. On Thursday, the Richmond Fed president Barkin said that it's not worth trying negative rates in the U.S.: I think negative interest rates have been tried in other places, and I haven’t seen anything personally that makes me think they’re worth a try here. if you looked at data as of today, you’d see it about as low as it’s going to go. We’ll be bringing people back to work, and eventually hopefully people back to stores and the like, in the coming weeks and months, and I would expect the data to go up from here.

Now the market is assuming that on 13th May, Powell may either completely trash or gave a definitive signal for the NIRP. In any way, on late Thursday USD also got some boost and closed around the session high after Fed further tapered it daily corona QE to $7B/day.

As a pointer, The Fed announced an emergency COVID-19 pandemic QE of $75B/day to address surging USD shortage in the money market (as a funding currency) amid the corona plunge of risk assets (equity) and also so-called safe-haven assets (gold). Then the stock market sentiment improved on hopes & hypes of COVID-19 therapies, vaccines, and curve flattening (gradual withdrawal of corona lockdown). And as a result of gradual easing of USD (cash) demand, the money (funding) market stabilized, leading to a gradual tapering of Fed’s unprecedented COVID-19 QE tapering ($60B-$50B-$30B-$15B-$10B-$8B last week and then $7B this week).

Thus Fed may now taper its COVID-19 QE bond-buying further by $1B per week to zero by June’20, and by then the COVID-19 curve may flatten visibly. Technically, the Fed’s tapering of COVID-19 QE bond buying may be indicating there are short supplies of debts in the market, which is also a sign of confidence. Thus, Dow also got some boost late Friday as the market now wants reopening of the economy and COVID-19 vaccine rather than unlimited corona lockdown and Fed’s monetary vaccine.

Apart from Fed’s COVID-19 QE bond-buying tapering, the Fed will also taper its MBS buying from $6B/day to $5B/day from next week. Effectively, the Fed will now buy much less than $625B record purchase the last week of March, when the financial market was on the verge of collapse in a corona doomsday scenario. As the Fed is now tapering its QQE-4, the other G3 central banks could also follow that (pandemic QE tapering), if the COVID-19 curve remains under control, until at least the vaccine develops.

On Friday (8th May), the much-awaited NFP flash data for Apr shows:

The U.S. economy (public and private sector excluding farming industry) lost -20.50M jobs in Apr against prior month (March-1st two weeks) downwardly revised figure of -0.870M; but was less than the market expectations of -22.00M job cuts. The private nonfarm payroll shows that the U.S. economy (only private business employees) lost -19.52M jobs in Apr against prior -0.842M in half-Mar, but was better than the expectations of higher job loss at -21.05M.

In Apr, it’s the largest ever job cuts in a month in the U.S. history (since the BLS began tracking the data in 1939) amid corona lockdown, bringing the U.S. employment to almost 131M, its lowest level since February 2011. Now almost 21.37M Americans are out of jobs in Mar-Apr due to corona lockdown.

The U.S. unemployment rate soared to 14.7% in Apr from prior 4.4% recorded in mid-Mar, but it was better than the expectations of the deeper unemployment rate at 16.0%. In Feb, prior to the COVID-19 disruption, the U.S. unemployment rate was at 50-years low at 3.5%. The Apr unemployment rate of 14.7% is the highest since the BLS started recording the monthly rate in 1948. Before that, in 1933 great depression periods, the U.S. unemployment rate peaked at 24.9%. The normal U.S. unemployment rate of around 4% will be at least 1% higher if the so-called discouraged workers are taken into account of the headline labor force and nominal unemployment figure.

The jump in the unemployment rate in Apr came with a lower labor participation rate at 60.2% sequentially from 62.7% in mid-Mar. The U6 (part-time workers/multiple jobholders) unemployment rate, often termed as real unemployment rate also jumped to 22.8% from the prior reading of 8.7% in mid-Mar.

The U.S. average hourly earnings (AHE) jumped by +7.9% on a yearly basis (y/y) in Apr from prior growth of +3.3% (revised upwards from +3.1%) in mid-Mar and higher than the expectations of no change at +3.3%. On a sequential (m/m) basis, the AHE grew by 4.7% from prior +0.5% (revised higher from +0.4%) and was higher than the expectations of +0.4%. The Average Weekly Hours (AWH) edged up to 34.2 from prior 34.1 and higher than the expectations of 33.7.

The unusual jump in AHE was the result of a higher unemployment rate in relatively lower-paid workers (bottom of the pyramid) coupled with higher remunerations by some companies to cope with COVID-19 disruptions.

The U.S. NFP report at a glance:

 

 

The White House Council of Economic Advisers said on the April NFP job report that the actual U.S. unemployment rate is around 19.5% if the discouraged workers are taken into account. The White House also acknowledged that the June NFP report should show some improvement rather than May and also virtually urged for structural reform in U.S. education and more supportive policies for the real improvement of the U.S. employment and productivity.

April’s Job Losses Show Many Workers Are Still Connected to Their Employers

Over the past weeks, Americans’ efforts to slow COVID-19’s spread have helped flatten the curve. As a result of this action, the Bureau of Labor Statistics’ (BLS) April Employment Situation report shows that nonfarm payroll employment fell by 20.5 million and the unemployment rate (U-3) jumped 10.3 percentage points to 14.7 percent. Both of these monthly changes are the largest in the series’ histories, as never before has the United States halted large portions of its economic activity.

While April’s jobs numbers may astound Americans, the economy’s strength earlier this year put the Nation in a better position to make temporary economic sacrifices to slow COVID-19’s spread. After all, the unemployment rate stood at a 50-year low of 3.5 percent only two months ago.

Aided by Federal policy, the connection between many unemployed individuals and their previous employers remains strong—as temporary layoffs account for many of April’s job losses and all of the month’s unemployment increase. But these connections deteriorate the longer that States continue limiting economic activity. As States start or consider reopening their economies in a responsible way, it is critical that policymakers’ focus expands to reviving the health of the United States labor force. As States start or consider reopening their economies in a responsible way, it is critical that policymakers’ focus expands to reviving the health of the United States labor force.

The April report also shows that the African American unemployment rate rose 10.0 percentage points to 16.7 percent and that the Hispanic American unemployment rate rose 12.9 percentage points to 18.9 percent. These substantial increases come after unemployment rates for both demographics reached historic lows in 2019. Furthermore, those with lower education levels are experiencing the largest job losses. The unemployment rate for those without a high school diploma rose 14.4 percentage points to 21.2 percent in April, and the unemployment rate for those with only a high school degree rose 12.9 percentage points to 17.3 percent.

Even though April’s unemployment rate reached the highest level on record, COVID-19’s sudden shock to the labor market has put more people out of work than the top-line number suggests. Those who lost their jobs and are not looking for work do not count as unemployed unless they are temporarily laid off; instead, they count as not in the labor force.

Since the U-3 rate is calculated by dividing the number of unemployed by the size of the labor force, the prevalence of this category of workers substantially changes the unemployment rate calculation. Flows from employment to not in the labor force totaled 9.5 million from March to April, compared with 17.5 million people who moved from employment to unemployment. Adding the increase in the number of Americans who were classified as not in the labor force because they are not searching for work further increases April’s unemployment rate. Adding the increase in the number of Americans who were classified as not in the labor force because they are not searching for work further increases April’s unemployment rate.

With the right policies, there is a reason to expect a faster labor market recovery than the unemployment rate suggests. The April report shows that temporary layoffs explain the entire increase in the number of unemployed from March to April, meaning these workers could return to their previous jobs as economic activity picks up. The April report shows that temporary layoffs explain the entire increase in the number of unemployed from March to April, meaning these workers could return to their previous jobs as economic activity picks up. Additionally, the number of temporarily laid-off workers is likely higher than the BLS reports.

Compared to the average April value over the previous four years, 7.5 million more workers were classified as employed but not at work for “other reasons” last month. Reclassifying these workers, who may be on temporary layoff and not getting paid, as unemployed would raise April’s U-3 rate to 19.5 percent.

BLS has other unemployment metrics to help capture this unprecedented labor market situation. While not the same as CEA’s modified U-3 rate of 19.5 percent, the more comprehensive U-6 rate captures workers who are part-time for economic reasons, as well as discouraged or marginally attached workers who were unemployed prior to the crisis and stopped searching for work. After hitting a series low of 6.7 percent in December 2019, the U-6 rate increased to 22.8 percent in April.

The April jobs report shows that the key to the labor market’s rebound—bonds between employers and employees—remains even while many Americans are not working. Looking ahead to next month, with many States reopening their economies, the May report may show early signs of the economic comeback. However, given the 7 million initial unemployment insurance claims filed since the April report’s reference period, and that the May report’s household survey covers next week, further indications of recovery may not be shown until the June report—even if they are already underway.with many States reopening their economies, the May report may show early signs of the economic comeback. However, given the 7 million initial unemployment insurance claims filed since the April report’s reference period, and that the May report’s household survey covers next week, further indications of recovery may not be shown until the June report—even if they are already underway.

Workers’ economic sacrifices allowed the United States to keep healthcare capacity from being exceeded in most of the Nation. But temporarily shutting down large portions of the economy to ensure adequate healthcare capacity and create systems to protect the most vulnerable came at a high cost—especially for minority and lower-income workers. While Federal responses have enabled more workers to remain attached to their jobs, for now, these critical attachments will weaken the longer that State-imposed shutdowns are in effect. As April’s jobs report shows, the declining health of America’s labor force needs to be considered as the Nation continues responding to COVID-19.

Conclusions:

Overall, assuming the U.S. economy does not deteriorate further due to COVID-19 carnage, around 19M U.S. furloughed workers should report to work after the complete withdrawal of corona lockdown (expected after June’20). But the ‘great corona come back’ may not be ‘V’-shaped like as the world would not be the same never; until at least an effective COVID-19 vaccine develops.

The market has estimated the April NFP data as 22.00M after the continuous jobless claims clocked 22.647M for the week ended 25th Apr, but a partial/gradual reopening of U.S. economy and actual data collection period may have made a positive surprise. The surge in jobless claims despite Employee Pay Check Protection as the current direct paycheck by U.S. Congress is encouraging lower-paid U.S. workers to quit the job early (temporary) and grab the government paycheck and the regular statutory unemployment benefits, higher in most of the cases than their average monthly income.

In fact, there is an incentive for the employees to separate early and file unemployment benefits applications to get the ‘helicopter’ corona relief money. The U.S. Congress has sanctioned this bail-out paycheck to at least July and thus most of the workers may not show any urge to join their workplaces even if it reopens in May-June. For the employers, during the lockdown and almost zero revenue, it’s also better to furlough employees rather than giving them a salary with borrowed money, which may or may not turn into s state-sponsored grant (subsidy) later. Thus there is a mutual consent/interest for both employees and employers to separate early.

In the U.S. as-well-as in EU, the latest GDP growth data showing an actual contraction of almost -2.5% per week of lockdown (y/y); i.e. one full month of lockdown may contract the economy by around -10% (y/y). Thus the ECB President Lagarde said the EU economy could contract by 10-15% in Q2CY20 (Apr-May-June) assuming full/partial lockdown till June. The same is almost true for the U.S; even if the lockdown is officially withdrawn from June, the economy will be in a transition period in Q3 (0% GDP growth or minor contraction) and in Q4 there will be some growth.

Thus, in this scenario, even if a vaccine comes by Sep-Dec’20, the H1CY20 U.S GDP contraction will be around -7.5% (y/y) and assuming some recovery in Q4, the H2CY20 GDP growth may be +1.5% (Q3: 0%; Q4: +3%), the U.S. may be heading for a GDP contraction of around -6% by Q4CY20; i.e. the full year 2020 assuming the development of part herd immunity; the SERS-nCoV-2 virus (COVID-19) will be contained but not eliminated.

 

 

Even after the official withdrawal of global lockdown from June onwards, the economy may run around 50% of its normal output against 25% in total/partial lockdown. There will be lots of COVID-19 mitigation measures, social distancing protocols, fear psychosis, economic uncertainty, and lack of consumer confidence, resulting in a huge drop in discretionary spending. This situation may also continue in Q4 if there is no COVID-19 vaccine. The U.S. as-well-as global economy will be limping back towards normalcy from Q1CY21 only if an effective vaccine develops within the Sep-Dec’20 timeline.

The focus will be also on Powell’s 13th May speech-whether he shrugged off the NIRP buzz for the U.S. clearly or keeps the option open. In true sense, by NIRP, a central bank (like ECB, BOJ) tries to force the bank (lenders) to lend indiscriminately/sensibly rather than parking the excess fund with the central bank for a risk-free decent return. But banks are not so much enthusiastic about NIRP/ZIRP as its negative for their business/lending model, resulting in lower NIM and lower earnings.

Also, banks are now more concerned for the return of capital (principal repayment) rather than return on capital (interest income), especially in lending to highly leveraged fragile companies/households. This NIRP/ZIRP policy may be also responsible for the EU debt crisis in 2012-13 post-2008-09 GFC and largely failed to stimulate the economy contrary to the expectations of policymakers. Moreover, this NIRP/ZIRP along with decades of QQE may be also responsible for the deflation scenario in the EU (ECB) and Japan (BOJ).

Trump is also personally against the NIRP concept, but he is also interested to roll over the huge U.S. debt at lower borrowing costs. But Trump (U.S.) will have to keep the borrowing cost higher than its EU (German) and Japanese peers; otherwise who will invest in Trumponomics and U.S. deficit funding? Even China will hesitate if it sees no attractive return from U.S. debt. Trump often compared the negative bond yield of Germany with the positive yield of U.S. and threatens Fed/Powell to follow that NIRP concept

But as an economist by education, Trump should also have the idea that Germany does not need to borrow (issuance of debt papers) in normal times (pre-COVID-19 period) as it’s a surplus country with ‘no-deficit’ (austerity) policy. But the U.S. has almost $25T debt and a huge fiscal deficit. And the U.S. has pro-growth policy; i.e. higher growth, higher inflation, and higher deficit than Germany. Germany can afford to issue a zero-coupon bond (no interest payment to the lender), but the U.S. can’t.

Thus if Trump chooses the permanent path of NIRP/ZIRP post-COVID-19, then we can expect the same deflation in the U.S. like the EU or Japan. In other words, it may be like ‘Japanification’ of the U.S. economy; lower demand from the world’s biggest consumer. This will be not only negative for the U.S. economy; it will be also negative for exporters to the U.S.; i.e. China/Japan/Asia as-well-as Germany/U.K./Europe.

In other words, the global economy may be under stress if the U.S. goes into deflation due to NIRP/ZIRP policy. The U.S. needs to take debt and spend to keep the global economy vibrant. And for that, exporters (China, Japan, and Europe) are funding U.S. debt (with their trade surplus) for an attractive risk-free return-positive bond coupon rate (apart from profit from exports to the U.S.).

The U.S. is mainly a consumption economy rather than manufacturing, unlike China. But now, Trump is trying to change that narrative and scrambling for ‘America First’, ‘Make in America’ (for America and the world) policy to ‘Make America Great Again’. Trump is sounding like a nationalist, but he is actually trying to make America a global supply chain like China. In that sense, Trump is also a globalist.

Trump is now competing with China for the supply of COVID-19 PPE and Ventilators to the rest of the world, taking advantage of the corona adversity as a perfect business opportunity. But to make America a global supply chain for non-medical consumer/industrial products Trump has to also compete with lower labor, raw material costs in the developing country (China/Asia/Mexico), and the FX factor.

For China, a vast part of the country is now no-longer ‘developing’ but already highly developed. China’s own domestic consumption is now formidable and most probably 2nd largest after the U.S. But China is now also gradually transforming from only a manufacturing/export hub to a mix of domestic consumption (along with export/manufacturing); i.e. it’s a hybrid economic model. As China’s labor cost is now also increasing rapidly along with the overall development, China is also now looking for many African countries to shift its production base for lower labor costs.

Over the last few years, China is actively making markets outside the U.S, knowing very well that single country dependence (U.S.) would be very risky. Thus China is taking initiative in OBOR (One Belt One Road) to spread its trade with the rest of the world without depending too much on Trump’s (U.S.) whims & fancies and morning mood (tweets). Over the years, China’s Prez Xi has also built a solid trade relationship with Europe as-well-as various other countries, while Trump was busy with trade/cold war and U.S. politics.

China as-well-as other Asian, European, and Mexico were able to export to the U.S. due to lack of production with competitive costs in the U.S. If U.S. goes to produce those products, which China and other countries export, it will be much more costly and ordinary U.S. consumers may not afford to buy at all. Trump is also very much aware of such hard reality and thus he deliberately excludes his tariffs on Chinese consumer goods (to a large extent), required by the ordinary Americans in their day-to-day life. For example, if China suddenly stops its shoe export to the U.S., much of the low-income Americans may not afford to buy decent shoes for them.

And even for Trump, the iPhone, iMac, the shirt and other accessories he uses in his daily life must have some China supply line connection. The U.S. generally tries to outsource anything, which costs much higher in the country if produced. The same is also true for the service industry despite the U.S. mainly a service-oriented economy rather than manufacturing. As a free-market economy with democracy, the U.S. can’t force its manufacturers or service providers to stop outsourcing for the ultimate cost-benefit.

There is a report that to pathogen infection minimize risk, the U.S. (NIH) is funding from 2015 (under Dr. Fauci) to the controversial Wuhan bio-lab and basically outsourcing its research on various coronaviruses including that’s on bats, suspected to be the primary natural host for the COVID-19 (SARS-nCoV-2). Every country, including the U.S., China do such types of virus research for a potential treatment as-well-as to battle any bio-weapon (WMD); it’s a part of the geo-political as-well-as healthcare strategy. The U.S. outsourced its coronavirus research from China to minimize domestic hazard risk after some past accidents involving such deadly pathogens.

There are many conspiracy theories involving both China and the U.S. for the origin of this COVID-19. Now, whether the COVID-19 pandemic is natural, accidental, or intentional by China or the U.S.; it’s now irrelevant. The world neither affords another war on COVID-19 (WW-3) nor even a renewed trade/cold war, designed to isolate/decouple China. Thus now the focus will be which country emerges stronger than others after COVID-19 pandemic- it’s clearly China as it has much less socio-economic damage than the U.S. or Europe.

But at the same time, as an exporter, China is also very much dependent on U.S. and European consumption. And many big U.S. and European/global MNCs are also dependent on China’s consumption apart from the U.S. and Europe as China is now the 2nd largest economy in the world.

Bottom line:

In this age of globalization, the U.S. (Trump) has to adopt the Chinese model of the hybrid economy, a mix of manufacturing/export, and a formidable domestic consumption. But these are all long term plans. In the short term, Trump needs another $3-5T huge COVID-19 fiscal stimulus (cash) for infra ($2-3T) and state bailout ($1-2T) in addition to $3T already employed. To fund this $6T fiscal stimulus, the U.S. Treasury will have to issue a deluge of debts (UST/bonds) and for that NIRP/ZIRP will be negative to attract angel investors.

Thus the U.S. needs to keep its bond coupon rate (+1.5% at present for 10Y UST against Germany’s 0%) at an attractive level to attract angel investors (China, Japan/Asia, and Europe) and Powell/Trump may refrain from NIRP/ZIRP eventually; otherwise, who will invest in ‘Rebuild America Again’ theme? If Powell trashes NIRP buzz on 13th May, it would be positive for the USD as a growth currency rather than a funding currency (EUR, JPY).

Technical outlook: USDJPY

Technically, whatever may be the narrative, USDJPY now has to sustain over 105.95-106.35* for a bounce back to 106.85*/107.30-107.80/108.25* and may further rally to 108.85/109.40*-109.85/110.50/111.25 and 111.75/112.50-113.00/114.25* in the near term (under bullish case scenario).

On the flip side, sustaining below 105.75, USDJPY may fall to105.35/105.00*-104.50/103.95 and further to 103.50/103.00-102.00/101.15* in the near term (under bear case scenario).

Note: 10/05/2020

IMMEDIATE SUP-RES: 106.35/105.95-106.85/107.30

 

USD/JPY

The BLS report: 8th May

THE EMPLOYMENT SITUATION -- APRIL 2020

Total nonfarm payroll employment fell by 20.5 million in April, and the unemployment rate rose to 14.7 percent, the U.S. Bureau of Labor Statistics reported today. The changes in these measures reflect the effects of the coronavirus (COVID-19) pandemic and efforts to contain it. Employment fell sharply in all major industry sectors, with particularly heavy job losses in leisure and hospitality.

This news release presents statistics from two monthly surveys. The household survey measures labor force status, including unemployment, by demographic characteristics. The establishment survey measures nonfarm employment, hours, and earnings by industry.

Household Survey Data

In April, the unemployment rate increased by 10.3 percentage points to 14.7 percent. This is the highest rate and the largest over-the-month increase in the history of the series (seasonally adjusted data are available back to January 1948). The number of unemployed persons rose by 15.9 million to 23.1 million in April. The sharp increases in these measures reflect the effects of the coronavirus pandemic and efforts to contain it.

In April, unemployment rates rose sharply among all major worker groups. The rate was 13.0 percent for adult men, 15.5 percent for adult women, 31.9 percent for teenagers, 14.2 percent for Whites, 16.7 percent for blacks, 14.5 percent for Asians, and 18.9 percent for Hispanics. The rate was 13.0 percent for adult men, 15.5 percent for adult women, 31.9 percent for teenagers, 14.2 percent for Whites, 16.7 percent for blacks, 14.5 percent for Asians, and 18.9 percent for Hispanics. The rates for all of these groups, with the exception of Blacks, represent record highs for their respective series.

The number of unemployed persons who reported is being on temporary layoff increased about ten-fold to 18.1 million in April. The number of permanent job losers increased by 544,000 to 2.0 million.

In April, the number of unemployed persons who were jobless less than 5 weeks increased by 10.7 million to 14.3 million, accounting for almost two-thirds of the unemployed. The number of unemployed persons who were jobless 5 to 14 weeks rose by 5.2 million to 7.0 million. The number of long-term unemployed (those jobless for 27 weeks or more), at 939,000, declined by 225,000 over the month and represented 4.1 percent of the unemployed.

The labor force participation rate was decreased by 2.5 percentage points over the month to 60.2 percent, the lowest rate since January 1973 (when it was 60.0 percent). Total employment, as measured by the household survey, fell by 22.4 million to 133.4 million. The employment-population ratio was at 51.3 percent, dropped by 8.7 percentage points over the month. This is the lowest rate and largest over-the-month decline in the history of the series (seasonally adjusted data are available back to January 1948).

The number of persons who usually work full time declined by 15.0 million over the month, and the number who usually work part-time declined by 7.4 million. Part-time workers accounted for one-third of the over-the-month employment decline.

The number of persons at work part-time for economic reasons nearly doubled over the month to 10.9 million. These individuals, who would have preferred full-time employment, were working part-time because their hours had been reduced or they were unable to find full-time jobs. This group includes persons who usually work full time and persons who usually work part-time.

The number of persons not in the labor force who currently want a job, at 9.9 million, nearly doubled in April. These individuals were not counted as unemployed because they were not actively looking for work during the last 4 weeks or were unavailable to take a job.

Persons marginally attached to the labor force--a subset of persons not in the labor force who currently want a job--numbered 2.3 million in April, up by 855,000 over the month. These individuals were not in the labor force, wanted and were available for work, and had looked for a job sometime in the prior 12 months but had not looked for work in the 4 weeks preceding the survey. Discouraged workers, a subset of the marginally attached who believed that no jobs were available for them, numbered 574,000 in April, little changed from the previous month.

Establishment Survey Data

Total nonfarm payroll employment fell by 20.5 million in April, after declining by 870,000 in March. The April over-the-month decline is the largest in the history of the series and brought employment to its lowest level since February 2011 (the series dates back to 1939). Job losses in April were widespread, with the largest employment decline occurring in leisure and hospitality.

In April, employment in leisure and hospitality plummeted by 7.7 million, or 47 percent. Almost three-quarters of the decrease occurred in food services and drinking places (-5.5 million). Employment also fell in the arts, entertainment, and recreation industry (-1.3 million) and in the accommodation industry (-839,000).

Employment declined by 2.5 million in education and health services in April. In health care, employment declined by 1.4 million, led by losses in offices of dentists (-503,000), offices of physicians (-243,000), and offices of other health care practitioners (-205,000). Employment also declined in social assistance (-651,000), reflecting job losses in child daycare services (-336,000) and individual and family services (-241,000). Employment in private education was declined by 457,000 over the month. Professional and business services shed 2.1 million jobs in April. Sharp losses occurred in temporary help services (-842,000) and in services to buildings and dwellings (-259,000).

In April, employment in retail trade declined by 2.1 million. Job losses occurred in clothing and clothing accessories stores (-740,000), motor vehicle and parts dealers (-345,000), miscellaneous store retailers (-264,000), and furniture and home furnishings stores (-209,000). by 2.1 million. Job losses occurred in clothing and clothing accessories stores (-740,000), motor vehicle and parts dealers (-345,000), miscellaneous store retailers (-264,000), and furniture and home furnishings stores (-209,000). By contrast, the component of general merchandise stores that includes warehouse clubs and supercenters gained 93,000 jobs.

In April, manufacturing employment dropped by 1.3 million. About two-thirds of the decline was in durable goods manufacturing (-914,000), which saw losses in motor vehicles and parts (-382,000) and in fabricated metal products (-109,000). Nondurable goods manufacturing shed 416,000 jobs.

Employment in the other services industry declined by 1.3 million in April, with nearly two-thirds of the decline occurring in personal and laundry services (-797,000). Government employment was dropped by 980,000 in April. Employment in local government was down by 801,000, in part reflecting school closures. Employment also declined in state government education (-176,000). Construction employment fell by 975,000 in April, with much of the loss in specialty trade contractors (-691,000). Job losses also occurred in the construction of buildings (-206,000).

Employment fell in transportation and warehousing in April (-584,000). Transit and ground passenger transportation and air transportation lost 185,000 jobs and 141,000 jobs, respectively. Wholesale trade shed 363,000 jobs in April, largely reflecting losses in the durable and nondurable goods components. Employment in financial activities fell by 262,000 over the month, with the vast majority of the decline occurring in real estate and rental and leasing (-222,000). Employment in information fell by 254,000 in April, driven by a decline in motion picture and sound recording industries (-217,000). Mining lost 46,000 jobs in April, with most of the decline occurring in support activities for mining (-33,000).

In April, average hourly earnings for all employees on private nonfarm payrolls increased by $1.34 to $30.01. The average hourly earnings of private-sector production and nonsupervisory employees were increased by $1.04 to $25.12 in April. The increases in average hourly earnings largely reflect the substantial job loss among lower-paid workers; this change, along with earnings increases, put upward pressure on the average hourly earnings estimates.

The average workweek for all employees on private nonfarm payrolls was increased by 0.1 hours to 34.2 hours in April. In manufacturing, the workweek declined by 2.1 hours to 38.3 hours, and overtime declined by 0.9 hours to 2.1 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls was increased by 0.1 hours to 33.5 hours.

The change in total nonfarm payroll employment for February was revised down by 45,000 from +275,000 to +230,000, and the change for March was revised down by 169,000 from -701,000 to -870,000. by 45,000 from +275,000 to +230,000, and the change for March was revised down by 169,000 from -701,000 to -870,000. With these revisions, employment changes in February and March combined were 214,000 lower than previously reported. (Monthly revisions result from additional reports received from businesses and government agencies since the last published estimates and from the recalculation of seasonal factors.)

Special Note by the BIS:

On May 8, 2020, BLS discovered errors in national estimates for seasonally adjusted all employees in professional and technical services, professional and business services, private service-providing, service-providing, total private, and total nonfarm. for seasonally adjusted all employees in professional and technical services, professional and business services, private service-providing, service-providing, total private, and total nonfarm. The corrected total nonfarm estimate is approximately 37,000 lower than initially reported. Estimates in the LABSTAT database have been corrected for February, March, and April 2020. BLS will make corrections to other release products next week.

Coronavirus (COVID-19) Impact on April 2020 Establishment and Household Survey Data

Data collection for both surveys was affected by the coronavirus (COVID-19) pandemic. The household survey is generally collected through in-person and telephone interviews, but personal interviews were not conducted for the safety of interviewers and respondents. The household survey response rate, at 70 percent, was about 13 percentage points lower than in months prior to the pandemic.

In the establishment survey, approximately one-fifth of the data is collected at four regional data collection centers. Although these centers were closed, about half of the interviewers at these centers worked remotely to collect data by telephone. Additionally, BLS encouraged businesses to report electronically. The collection rate for the establishment survey in April was 74.9 percent, essentially unchanged from collection rates prior to the pandemic.

In the establishment survey, workers who are paid by their employer for all or any part of the pay period including the 12th of the month are counted as employed, even if they were not actually at their jobs. Workers who are temporarily or permanently absent from their jobs and are not being paid are not counted as employed, even if they are continuing to receive benefits. The length of the reference period does vary across the respondents in the establishment survey; one-third of businesses have a weekly pay period, slightly over 40 percent a bi-weekly, about 20 percent semi-monthly, and a small amount monthly.

 

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