Ahead of the Non-Farm Payrolls (NFP) report to be released at the end of the week, economists around the world struggle to assess the impact of the coronavirus pandemic. The Global Risk Survey of Oxford Economics offers some interesting perspectives on the implications for US businesses, employment, and disposable income patterns.
Almost 32% of businesses expect to be negatively affected, while 60% of them expect to bounce back after an initially negative effect. The rest of the respondents expect to be either broadly unaffected or positively affected.
What the April Data Could Show
Employment data is on everybody’s lips these days. After the NFP release was postponed one week due to May 1st holiday, the market expects the release to show that twenty-eight million people lost their jobs in April in the US. Which is three times bigger than the job loss during the 2008 great financial crisis.
Average Hourly Earnings (AHE), a proxy for inflation expectations, is forecasted to drop to the 2012 lows. Lower oil prices did not help with inflation numbers, and AHE’s decline is expected despite upward bias from low-wage industries.
All eyes would be on the Participation Rate too. It has the potential to distort the data, and it refers to the number of people counted into the labor force. It is expected to fall below the 60% threshold and to distort even higher levels for the Unemployment Rate.
Speaking of the Unemployment Rate, the forecast is for it to jump to a record 17%, despite the above-mentioned bias that it will not reflect the economic reality. After all, the Unemployment Rate is a lagging indicator, and its level depends on many different factors.
One, as mentioned earlier, is the participation rate. Another one is the people employed but not at work, which count as having a temporary layoff. Finally, investors may want to have a look at involuntary part-time as well.
Crunching the numbers on this jobs report is likely to reveal which industries have been affected more than others. The airline industry suffered its biggest activity decline in history, while the retail, accommodation, and food services industries were also hit hard.
As always, when it comes to bad jobs data, there is a glimmer of hope because it refers to past economic conditions (April), there is a chance that things improved in the meantime.