News

Bruno Cavalier
Chief Economist at ODDO BHF

Despite the very brutal shock to the labour market, US households do not appear to be extremely depressed. Two reasons explain their relatively sanguine state of mind. First, those who have lost their jobs have received decent financial compensation. Second, most of them hope to be called back to work by their respective employers fairly soon. Two pitfalls are now looming. The first is that unemployment benefits will be significantly reduced in the upcoming fiscal package. The second is that the resurgence of the coronavirus pandemic risks turning temporary layoffs into permanent ones.

The week's focus

Employment rebounded sharply in May then June. High-frequency indicators suggest that this was not the case in July (the next monthly jobs report will be released on 7 August). Most of the jump was concentrated in four sectors representing less than a third of the economy: construction, retail trade, leisure and hospitality, and personal services (designated by a+b+c+d in the table below). However, these sectors are also those most exposed to the pandemic which is inciting households to reduce their travel. The sharp rebound in the number of cases of infection could leave the employment rate this summer almost 10 points below its pre-pandemic level.

However, in surveys of consumer morale, households do not express excessive anxiety (see p.2), as if they considered the shock to be just transitory. In fact, the majority of the newly unemployed are still hoping to be recalled by their companies in the next six months. In June, of the 18.1m unemployed registered, close to 60% were in this situation (they are described as being on layoff). Just 7.5 million were really looking for a new job. At that time, the official unemployment rate was 11.1%, but stripping out people hoping to return to their former employers, the rate would have been just 4.8%, compared with 3.4% at the low point (see first line of the table and the breakdown by sector). Unfortunately, this hope is often dashed as businesses face even stronger constraints. From April to June, we estimate that the fall in the number of unemployed on layoff can be broken down for two-thirds by the return to work and for the other third by permanent layoffs. If we extend this trend, the "restated" unemployment rate would continue to rise by about two points over the next six months. These are not the kind of developments that characterise a genuine recovery.

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Conflict of interests:

ODDO BHF CORPORATES & MARKETS, a division of ODDO BHF SCA, limited sharepartnership - Bank authorised by ACPR. ODDO BHF and/or one of its subsidiaries could be in a conflict of interest situation with one or
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Le présent document n'est pas un document contractuel; il est strictement destiné à l'usage privé du destinataire. Les informations qu'il contient se fondent sur des sources que nous estimons fiables, mais dont nous ne pouvons
garantir l'exactitude ni l'exhaustivité. Les opinions exprimées dans le document sont le résultat de notre évaluation à la date de la publication. Elles peuvent donc être révisées à une date ultérieure.

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