Implications: Forget about productivity for a minute. Workers filed 3.17 million new claims for unemployment insurance last week, continuing the trend of catastrophically high readings we've seen since government shutdowns of the economy to fight the Coronavirus began a little over a month ago. However, the weekly increase in claims continues to slow. After peaking at 6.87 million in the last full week of March, we have seen five consecutive weeks during which layoffs have been less than the week before. Continuing claims, data which lags initial claims by one week, hit a record high of 22.65 million and are likely to rise again in next week's report. Plugging these figures into our models suggests the unemployment rate for April will be in the vicinity of 16.4%, with nonfarm payroll losses around 22 million. All this echo's yesterday's ADP employment report which showed 22.6 million private-sector jobs lost in April. Now back to productivity, which declined at a 2.5% annual rate in the first quarter, falling at the fastest pace since late 2015. The decline in nonfarm productivity came as output and hours worked both fell, but output falling at a faster pace pushing output per hour lower. Productivity is still up 0.3% from a year ago but don't expect this to last. Productivity should temporarily fall further in Q2 as the fallout from the coronavirus and the government's actions to close business to "flatten the curve" lead to further significant drops in output. "Real" (inflation-adjusted) compensation continued to rise, in Q1, up at a 0.9% annualized pace. On the manufacturing front, productivity fell at a faster 3.3% annualized pace in Q1 as output fell much faster than hours. Once the economy starts recovering in the second half of the year, productivity should revive, as well.
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