by Dennis Pelak
HAWTHORN WOODS, Ill., June 1, 2020 – The U.S. economy in the second quarter of 2020 due to the COVID-19 virus continues to be very weak.
Industrial production falls to lowest number ever
Total industrial production fell 11.2 percent in April for its largest monthly drop in the 101-year history of the index, as the COVID-19 pandemic led many businesses to slow or suspend operations throughout the month.
Consumer price indexes
Month-over-Month measures of the Consumer Price Indexes (CPI) are in negative territory, indicating the lack of pricing power in the current U.S. economy.
According to the Bureau of Labor Statistics (BLS), consumer prices are in negative territory for the month, with both the CPI and core CPI (less food and energy) in negative territory. Year-over-year, the CPI is up 1.4% and core CPI is up 0.3%.
Record job losses
- Initial unemployment claims for the week ending May 23 were 2,123,000. This is the 10th week that claims that topped 2 million.
- The ten-week running total of initial claims is 40.732 million. This is the highest in U.S. History.
However, some of the workers have been called back to work, as states have opened up for business. Additionally, some Americans submitted claims and were not eligible.
Continuing claims provide a better picture at this point as to what is happening in this stage of the economic cycle:
- The unemployment rate jumped to 14.7% in April, as non-farm payrolls declined by 20.5 million jobs.
- The headline jobs number fell by 20.5 million and the unemployment rate jumped 10.3 percentage points to 14.7% according to the BLS Employment Report.
April retail sales down
Retail sales declined 16.4% vs. expectations of an 11.2% decline. Excluding cars, the miss was much bigger than expected. Ex-auto sales declined 17.2% compared to the expected 8.6% decline.
In the wake of a very weak Income and Outlays report, the GDPNow forecast from the Atlanta Federal Reserve is forecasting a shocking -51.2% growth for GDP in Q2 for 2020. This is the largest decline in the history of the US.
The true test of the U.S. economy will be the economic numbers for Q3. From these numbers we will be able to see how fast the U.S. economy bounces back from the COVID-19 virus. We predict a significant bounce back from Q2, but how strong it will be may be disappointing. We will continue to update you each month on the performance of the U.S. economy.
Dennis Pelak is a retired Financial Services executive who has studied economics and statistics for more than 40 years. He updates this page monthly with his opinions regarding the economy. He can be reached by email at email@example.com.