News that 1.3 million new workers applied for unemployment benefits for the week ending July 11 was discouraging. The new numbers came in at almost the same level as the previous week’s count, just slightly below the nearly 1.38 million four-week moving average. Are we stuck in a downward spiral or what? And what about other parts of the economy? Do we find anything besides bad news when we look at major economic sectors?
Well, a hard look at the data tells us that the numbers being added to the unemployment rolls each week have fallen significantly and continuously, from the nearly 6.87 million new claims that hit on the week ending March 28. In fact, this and other data suggest that April was a turning point of sorts for the economy. It’s when the speed at which the economy was declining began to diminish.
We see this from another angle in data just reported for June retail sales, which rose 7.5% for the month, following an increase of 18.2% in May. Sales had fallen 14.7% in April. Here, the data include everything from autos to furniture to clothing and sports gear. Interestingly enough, while overall retail sales rose in June, online retail sales fell 2.4%. The data tell us not only that April marked a low point but that more folks are getting out and shopping the old-fashioned way.
What about other parts of the economy? Does the April turning point appear elsewhere? And if so, does this give reason for a bit of optimism? The answer, I believe, is yes. Housing starts, which showed a nice June surge, have almost moved into positive growth territory when measured on a year-over-year percentage change basis. But note this: the deceleration in starts that accompanied the virus recession bottomed out in April.
In the nearby Federal Reserve chart, I show year-over-year employment growth for the economy’s four major sectors. Notice that April is the turning point for construction — it’s the most robust of the four sectors reported — and also for manufacturing and services, but not for government, which seems to get a positive bump in May. In three cases, the turning points mark a time when negative growth begins to be less negative.
Carving into the government data reveals that state and local government employment continues to fall at a faster pace. Federal government employment growth has been seemingly undisturbed by the coronavirus recession. Part of the federal stability may be explained by U.S. Census Bureau hiring.
Does this turning point analysis suggest we can all rest easier? Well, maybe just a wee bit more comfortably but not much. As we all know, America’s coronavirus recovery moves forward on a bumpy path. Some regions are now easing restrictions after engaging in severe public health battles to control virus outbreaks, while other states that relaxed and reopened parts of their economies in April and May are reversing their positions. So far, though, additions to the unemployment rolls are not accelerating alongside the virus. Housing starts and retail sales are increasing, and employment growth for three important economic sectors is headed toward positive territory.
Let’s hope the momentum stays with us and that April 2020 will remain the turning point.
Bruce Yandle is a contributor to the Washington Examiner’s Beltway Confidential blog. He is a distinguished adjunct fellow with the Mercatus Center at George Mason University and dean emeritus of the Clemson University College of Business & Behavioral Science. He developed the “Bootleggers and Baptists” political model.
