First signs of COVID-19 effects may be seen in February's employment data
The first signs of weakness associated with COVID-19 may start to show up in Friday’s employment report.
According to Diane Swonk, chief economist at GrantThornton, more seasonable weather, spillover effects from production cuts at Boeing and declines in construction jobs are also expected to put a damper on employment in February.
Economists surveyed by IFR Markets expect Friday’s employment report to show a gain of 175,000 jobs last month with the unemployment rate remaining steady at 3.6%.
“The oil sector continued to restructure on the heels of lower prices while manufacturing suffered a two-pronged attack from the spillover effects of cuts in production of Boeing’s 737 Max and COVID-19,” Swonk said. “Supply chain disruptions were particularly hard on the electronics sector. We saw layoffs at some of the busiest ports for imports from China and in the transportation sector during the month.”
She said there were some areas of uncertainity.
“The question mark is leisure and hospitality. Visa recently warned of a significant blow to profits from reduced travel and tourism to and from Asia. Chinese tourists, who are some of the wealthiest in the world, are now absent from major tourist destinations,” Swonk said. “Much of that weakness is yet to come. The ISM for the services sector suggests it held up well in February, despite the start of conference cancellations and curbs to travel by major firms.”
Additionally, increases in healthcare and professional services are expected to be tempered by losses in retail, mining and manufacturing. She noted that retail store closings picked up in February as the shift from bricks to clicks intensified. Construction employment returning to typical seasonal levels could shave more than 40,000 jobs off the total for the month, Swonk added.
The only upside surprise in the February report could be Census hires.
“The jump in employment tied to the 2020 Census is expected to be much smaller than we saw in 2010 and not hit until spring,” she said. “The number of regional Census offices has dropped to about half of what we had in 2010 as the Commerce Department leverages technology to check addresses. Hiring for the Census played a key role in masking some of the pain associated with the downturn back in 2009.”
Jobless claims decline
In the week ending February 29, the advance figure for seasonally adjusted initial jobless claims for the week ended Feb. 29 fell 3,000 to 216,000 from the previous week's unrevised level of 219,000, the Labor Department reported on Thursday.
Economists surveyed by IFR Markets had expected claims to have fallen to 215,000.
The four-week moving average rose 3,250 to 213,000, from the prior week's unrevised average of 209,750.
The advance seasonally adjusted insured unemployment rate was 1.2% for the week ending Feb. 22, unchanged from the previous week's unrevised rate.
The advance number for seasonally adjusted insured unemployment during the week ending Feb. 22 was 1,729,000, an increase of 7,000 from the previous week's revised level. The previous week's level was revised down by 2,000 from 1,724,000 to 1,722,000.
The four-week moving average was 1,721,250, a decrease of 7,500 from the previous week's revised average. The previous week's average was revised down by 500 from 1,729,250 to 1,728,750.
Productivity rises in Q4
Non-farm business sector labor productivity rose 1.2% in the fourth quarter of 2019, the Labor Department said, as output increased 2.4% and hours worked gained 1.2%.
Economists surveyed by IFR Markets had expected a gain of 1.4% in the fourth quarter.
From fourth quarter 2018 to fourth quarter 2019, productivity increased 1.8%, reflecting a 2.6% rise in output and a 0.8% increase in hours worked.
Unit labor costs in the non-farm business sector increased 0.9% in the fourth quarter of 2019 as hourly compensation grew at 2.1%, a faster rate than productivity at 1.2%. Unit labor costs increased 1.7% over the last four quarters.
Manufacturing sector labor productivity fell 0.8% in the fourth quarter as output decreased 0.4% and hours worked increased 0.4%. Total manufacturing sector productivity has declined 0.6% over the last four quarters as output decreased 1.1% and hours worked decreased 0.5%.
Productivity decreased 0.9% in the durable manufacturing sector in the fourth quarter of 2019, reflecting a 1.4% decline in output and a 0.5% decrease in hours worked. Productivity decreased 1.2% in the nondurable manufacturing sector, as output increased 0.8% and hours worked increased 2.0%. Unit labor costs in the total manufacturing sector increased 3.6% in the fourth quarter of 2019 and was up 3.7% from the same quarter a year ago.
Factory orders decline
New orders for manufactured goods fell 0.5% in January, after a 1.9% gain in December, the Commerce Department reported.
Economists surveyed by IFR Markets had expected orders to have fallen by 0.2%.
Factory orders have been down two out of the last three months.
Shipments declined 0.5% after a 0.5% gain in December. Unfilled orders were almost unchanged after remaining stead in December. The unfilled orders‐to‐shipments ratio was 6.63, down from 6.65 in December.
Inventories decreased 0.1% after rising 0.4% in December. The inventories‐ to‐shipments ratio was 1.40, unchanged from December.
New orders for manufactured durable goods in January declined 0.2% after rising 2.8% in December. Shipments of manufactured durable goods dropped 0.2% after declining 0.2% in December.