US: Expect another horrendous labor market report in May – Wells Fargo

The US economy destroyed 20.5 million jobs in April. Analysts at Wells Fargo point out the number of jobs fell by a record amount, and the unemployment rate jumped to an all-time high. They see another bad report in May. 

Key Quotes: 

“This stunning contraction was the largest loss of jobs in both absolute and percentage terms since the series began in 1939. As tragic as this number is, it comes as little surprise as more than 26 million individuals had filed for unemployment benefits between the March employment survey and the April survey. Sadly, there will be more job losses reported when the May report is published next month, because seven million additional individuals have subsequently filed for unemployment benefits.”

“There was no sub-category that was spared from the carnage.”

“The unemployment rate would have jumped even higher had not 6.4 million individuals left the labor force. But the additional job losses that we expect will be reported in the May report means that the unemployment rate will rise even higher next month. That said, 18 million of 23 million unemployed individuals reported that they are on “temporary layoff”.”

“Interestingly, average hourly earnings, which have been rising 0.2% to 0.3% on average for the past few years, jumped 4.7% in April. But this is hardly a sign of strength. As noted above, the leisure & hospitality sector shed nearly eight million jobs in April. The average hourly wage in that sector was only $16.86 in March, far below the economy-wide average of $28.67. Because job losses in April fell disproportionally among low-wage workers, the average wage jumped. If, as we expect, the unemployment rate remains elevated in coming months, then growth in hourly earnings should weaken considerably.”