Don’t Be Surprised By A Weak Jobs Report On Friday

As we await Friday’s jobs report, let’s take a look at where we are so far in the employment recovery, starting with macro-level employment data from the Bureau of Labor Statistics: Click for a larger image.

In April, the economy lost 20,787,000 jobs. 47% were in two areas: retail (which lost 2,299,000) and leisure (which lost 7,575,000). Both of these sectors are “consumer-facing” — meaning they deal directly with the public.

Here are charts of the data:Retail employment has made up about 50% of its losses.Leisure and hospitality employment has dropped a bit more.

In May and June, the economy added 7,499,000 jobs. 61% of these gains were in retail (1,111,000) and leisure/hospitality (3,491,000).

Since the beginning of July, we’ve seen a number of states reverse their respective reopenings as COVID cases climbed. A key to many of these plans is a partial shutting down of restaurants. Add to that an increasingly large number of retail bankruptcies. Today alone Lord & Taylor and Men’s Wearhouse announced the filing of Chapter 11 proceedings. The Washington Post (subscription required) has compiled a list of 13 retail bankruptcies (which include today’s additions). These companies will be closing stores, lowering the number of retail jobs available.

Let’s add several more data points to the above data.Initial unemployment claims (in blue) and its 4-week moving average (in red) are still being reported at over 1,000,000/week. These are the highest levels ever in this data.

The current unemployment situation is very much falling on those with less educational achievement. The unemployment rate for high school graduates with no college is 12.1% (blue); for those with some college (red), the rate is 10.9%. These people will have a harder time finding jobs in the current economy as their usual sources of employment (retail and leisure) are themselves seeing a difficult environment.

The good news is there’s been a rebound in the jobs market. The bad news is that this “recovery” may be weakening as states reimpose social distancing protocols. In addition, the Spring lockdown accelerated losses in the retail sector, which was losing its battle with online retailing. Putting this all together, we have a precarious job recovery that could see a slowdown or an unwanted reversal in Friday’s jobs report.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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