Jobless Claims Still Number in the Millions

By | May 27, 2020

Welcome to FTR’s “Monday Morning Coffee “ blog. The following article is designed to keep busy executives up to date with the latest economic data releases. Released every Monday, this blog promises to keep our clientele updated with the latest weekly economic news and developments, highlighting its impact on the transportation, freight, and equipment markets. Hopefully, this will be an informative addition to the fine body of work associated with FTR.


World stocks took a hit on Friday as China moved to impose a new security law on Hong Kong after last year’s pro-democracy unrest, further eroding the already deteriorating U.S.-China relations. These tensions, plus China dropping its growth target for the first time, knocked oil prices down more than 5%. European shares opened broadly lower on Friday, with blue-chip indexes in London, Paris, and Frankfurt all down more than 1.5%. Hong Kong’s Hang Seng Index slid more than 5% to a seven-week low. MCSI’s world stock index remained up more than 2.5% this week as central bank stimulus in the face of the pandemic shock is still underpinning investor sentiment. Central bank liquidity has been impressive. The G-10 central bank balance sheet assets have expanded by $4.5 trillion in the last 12 weeks, more than it had expanded in the 3 and a half years between 208 and 2012.

U.S. stock benchmarks ended Friday little changed as investors looked ahead to a three-day weekend. For the week, equity indexes ended with strong gains as markets largely shrugged off rising U.S.-China tensions and regained optimistic that the coronavirus impact on corporate earnings will be relatively short-lived. The Dow Jones Industrial Average fell 8.96 points, or less than 0.1% to end at 24,465.16 on Friday, while the S&P Index closed 6.94 points, or 0.2% to close at 2,995.45. For the week, the Dow climbed 3.3% and the S&P advanced 3.2%.

The reopening of the economy is underway, with all 50 states starting to roll back restrictions. It remains too early to assess the effect of the reopening on the spread of the virus, which continues to slow in a brad-based manner, despite an impressive, albeit late ramp up in testing. Nearly 2.5 million Americans filed initial unemployment claims last week, bringing the cumulative total over the last nine weeks to more than 38 million. Economic data was sparse last week, but housing starts fell from a 1.276 million annual pace in March to 891,000 in April. Existing home sales plummeted in April, falling to their most subdued pace since 2011, as the pandemic deterred additional homebuyers from visiting open houses. Sales came in at a 4.33 million unit pace in April, down 17.3% from March and down 17.2% from a year earlier.

Jobless claims still number in the millions and millions more are filing for pandemic unemployment assistance. Initial claims fell by 249,000 to 2.438 million in the week ending May 16. However, an additional 2.227 million filed for UI benefits, up from 850,000 in the previous week. Continued claims increased from 22.58 million to 25.073 million in the week ending May 9. The insured unemployment rate increased from 15.5% to 17.2%. Many businesses are running out of funds and are starting to close. The reopening of the economy at the slow measured pace cannot save many small businesses. Demand destruction has hit consumer confidence and spending hard. We do expect that consumer spending will rebound in the third quarter, but for many businesses and consumers, the rebound in spending will be too little, too late.

Next week, we get a look at the Chicago Fed National index new home sales, personal income and outlays and durable goods orders.

Latest Data

The U.S. Economy:

The U.S. housing market was not immune to the impact of COVID-19. Housing starts fell from a 1.276 million annual pace in March to 891,000 in April. Single-family starts declined 25.4% to 650,000 annualized units. Multi-family starts were down 40.5% to 241,000. Housing permits fell 20.8% to 1.356 million units, the fourth decline in five months. Housing starts fell sharply in April, but conditions appear to be improving in May. Mortgage applications have increased the last few weeks. The NAHB housing index rose from 30 to 37 in May, recouping some of the 42-point ss in April. Housing was showing resilience before the economy shutdown and may regain some strength earlier than some segments. According to Redfin, a national real estate brokerage, the number of listings has risen over the last few weeks but remain below a year ago, which shows some promise. Also, the number of de-listings is declining, but remains higher than in 2019. Housing may be one of the sectors of the economy that might see a v-shaped recovery.

Existing home sales plummeted in April, falling to their most subdued pace since 2011, as the pandemic deterred additional homebuyers from visiting open houses. Sales came in at a 4.33 million unit pace in April, down 17.3% from March and down 17.2% from a year earlier. All four regions saw declines in April. Sales of existing single-family homes totaled 1.94 million annualized units in April, down from 4.74 million in March and down 15.5% from a year earlier. The median existing home price was $288.700, up 7.3% from a year earlier. Sales of condos and co-ops came in at 390,000 in April, down from 530,000 in March. Listing of existing homes totaled 1.47 million in April, down 19.7% from a year earlier. Because of the sharp drop in sales, the inventory-to-sales ratio came in at 4.1 months of sales, up 0.7 from a month earlier and down 0.1 from April 2019. The outlook for existing home sales is likely to be tough for the next few months. Mortgage rates are very low, but 36 million people have lost their jobs. The labor market likely will not see a meaningful turnaround until 2021. Sales will hold-up better than some parts of the economy, but they will not be immune to economic weakness.


China dropped its annual growth target for the first time on Friday and pledged more spending as the impact of the COVID-19 continues to hammer the world’s second largest economy. The economy shrank 6.8% in the first quarter, the worst contraction in decades, hit by the coronavirus. This is the first time China has not set target for gross domestic product since the government began publishing targets in 1990. China has set a target to create over 9 million jobs this year, down from the goal of at least 11 million in 2019 and the lowest since 2013. China’s parliament is starting its annual meeting this week. Among the announcements were new security mechanisms for Hong Kong, which is expected to curb autonomy for the city. China is targeting a 2020 budget deficit of at least 3.6% of GDP, up from last year’s 2.8%. The fiscal stimulus is equivalent to 4.1% of China’s GDP, on par with the stimulus associated with the global financial crisis.

Important Data Releases This Week

The April Chicago Fed National Activity index will be released on Tuesday, May 26 at 8:30 AM.  The index took a deep dive in March to -4.19. As the economy started to reopen in May, we do expect to see some improvement but the index will remain a at low level in April and then start to trend upwards. We project the index to be -5.0 for April.

April new home sales will be released Thursday, May 21 at 8:30 AM. New home sales fell 15.4% in March and are expected to fall 20% in April, following the other April indicators for housing. That said, mortgage applications have trended higher the last couple of weeks, suggesting that housing may pull out of the declines quicker than some other sectors of the economy.

April personal income and outlays will be released Thursday, May 28 at 8:30 AM. Personal income fell 2% in March, the bigger than any month in the Great Recession. April is likely to be much worse. Spending fell a record 7.5% and stores were open half the month. We project personal income t fall 6.5% for April and spending 12%.

Durable goods orders for April will be released on Friday, May 29 at 8:30 AM. Durable goods orders fell at the second deepest rate on record in March, because of cancellations at Boeing. Orders are expected to fall 18% in April. Core capital goods orders fell only a scant 0.1%. This resilience is not expected to have continued in April. The outlook for capital spending is fairly bleak, with core capital goods orders set to retreat 5%.

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About Steve Graham

Steve is one of the premier analysts in the transportation equipment industry. On a monthly basis Steve tracks and analyzes in detail the trailer and heavy-duty truck industry. Aside from following these two sectors he is also instrumental in helping our customers analyze the economy and its impact on transportation and transportation equipment.