ADP announced on Wednesday that companies had lost 2.76 million additional jobs last month. Under normal circumstances, such a report would be considered catastrophic. But these are not normal hours.
Instead, a number far below the estimate of 8.75 million has given hope that the most serious job crisis in US history is about to reverse as an economy hit by the coronavirus pandemic is taking its first steps towards reopening.
“The good news is that I think the recession is over, the Covid-19 recession is over, except for another second wave, a second major wave, or real serious political mistakes,” said Mark Zandi, chief economist at Moody’s Analytics, which puts the private payroll reports with ADP. The bad news, he added, is that “recovery will be a blow until a vaccine or therapy is widely distributed and adopted.”
Although the number of ADPs can be volatile and vary widely from Street’s estimates, Street Ad has taken this to another level.
However, Zandi said there were several explanations.
The first is that last week’s jobless claims report provided the first indications that the rate of layoffs had slowed considerably and that people were returning to work.
Continuing claims, or workers receiving unemployment benefits for at least two weeks, fell by nearly 3.9 million while first claims totaled more than 2.1 million. Outstanding claims peaked at 24.9 million on May 9, but it was three days before the week of sampling that ADP and the Department of Labor use for their estimates.
Zandi said he still expects unemployment to exceed 20%, the worst since the Great Depression. He estimated that about 50 million American workers have been affected in some way by the coronavirus-induced recession.
Even at an initial reading of 20.5 million, the government’s estimate for April probably underestimated the total due to a tabulation gap in which millions of workers who had been classified as “absent from work” should have be considered unemployed. The Bureau of Labor Statistics estimated that the unemployment rate of 14.7% would have been almost 5 percentage points higher if these workers had been counted correctly.
“The loss of jobs is decreasing. The layoffs appear to have peaked in late March and early April and ended in early May, “said Zandi. “I expect job growth to resume in June. “
Zandi predicted that unemployment should stabilize at around 10%, which was the peak of the financial crisis, and remain there unless Congress approves further fiscal stimulus.