April 3, 2020

In any given month employers can boost output by either additional hiring or by lengthening the number of  hours that their employees work.  Payroll employment for March fell 701 thousand as restaurants and bars closed, retail jobs declined, doctors and dentists offices closed, construction and factory jobs declined.  Almost certainly the expansion came to an end in February 2020 and the recession began in March.

The nonfarm workweek declined 0.2 hour in March to 34.2 hours which is the shortest workweek in almost a decade.  It is also just a first installment on further shortening of the workweek in the months ahead.

The declines in  employment and hours worked are reflected in the aggregate hours index which rose fell  1.1% in March.  It, too, will fall sharply in each of the next couple of months.

The factory workweek declined 0.3 hour in March to 40.4 hours.

Overtime hours declined 0.2 hour in March to 3.0 hours which is the least amount of overtime hours since July 2010.

.For what it is worth, we now expect a 20% drop in second quarter GDP.  Estimates currently range from a drop of 10% to a decline of 35%.  Any of those estimates are possible.  Remember, we still have not seen any second quarter data.  The estimates will converge as those data become available.  But right now we all know Q2 GDP will fall by a record amount.  But going forward the issue is how quickly the virus will show signs of slowing its rate of spread and how soon businesses will be able to reopen.  Based on the Chinese experience we are expecting to see early signs of improvement by mid-April and more clear-cut evidence by the end of the month.  If that is the case, consumer and business confidence would climb quickly, the stock market would surge upwards after having lost nearly 30% of its value in the past couple of months, and businesses could gradually re-open.  Following the 20% drop in Q2 GDP we anticipate an 8.7% snap-back in Q3 and 7.0% growth in the fourth quarter.

Stephen Slifer


Charleston, SC