Which data to watch and not watch this week: Watch Thursday’s unemployment insurance claims, not Friday’s jobs day numbers
It’s not often that you’ll hear us telling you not to pay attention to the Bureau of Labor Statistics’s monthly employment situation report that is released on the first Friday of every month. We usually elevate these “jobs day” numbers because they are the timeliest data on payroll employment, the unemployment rate, the share of the population with a job, and wage growth. But this week, the numbers coming out on Friday will be genuinely outdated, if we want a true look at how the coronavirus has affected the economy. Therefore, this week we recommend you focus on the unemployment insurance (UI) claims data that will be released on Thursday morning, which will provide a much more up-to-date read on the state of the labor market.
Why? It’s all about the different reference periods for these two data releases. The reference period for Thursday’s initial UI numbers is last week (March 22–28). That means these numbers capture key information about layoffs in almost real time. The reference period for Friday’s jobs day report, on the other hand, is mid-month—specifically, it’s the payroll period that includes March 12 for the establishment survey and the calendar week that includes March 12 for the household survey. Even though mid-March was just a couple weeks ago, things deteriorated so fast in the last half of March that a mid-month measure will not come close to capturing the current state of the labor market.
The Friday jobs numbers will likely, however, reflect the leading edge of the downturn. We already know from the unemployment insurance claims data that there was a significant uptick in initial unemployment insurance claims for the week ending March 14, which includes the relevant reference period for this Friday’s report. UI claims rose from 211,000 in the week ending March 7 to 282,000 in the week ending March 14. However, initial claims skyrocketed in the week ending March 21 to 3.3 million, by far the highest level in the history of the series, and is expected to have risen even higher last week. Friday’s jobs report will decidedly not include this huge increase in job losses in the last half of the month. Therefore, the measures reported on Friday will be nothing more than the tip of the iceberg for the pandemic-induced recession we are in now. Thursday’s UI data from March 22–28, on the other hand, will provide a much clearer read on what workers are up against.
In the coming weeks, we expect millions more job losses as the economy continues to contract. Based on estimates from Goldman Sachs, we expect 19.8 million workers to be laid off or furloughed by summer, even accounting for the effect of the large relief and recovery package passed last week. On the first Friday in May, when the jobs data that reflects mid-April are released, we will get a more complete picture of the effects of the first month of COVID-19 (and related social distancing measures) on the labor market—from job losses to hours reductions to the sectors and demographic composition of the workers most affected. Until then, we urge you to track the unemployment insurance claims data instead. Check back here tomorrow for our analysis of the latest report and for all of our analysis on the coronavirus’s effect on the economy.