US: Labour data is probably much softer than it looked – Standard Chartered

The headline US household unemployment rate was 14.7% in April but economists at Standard Chartered Bank estimate the effective unemployment rate at 25.5% and expect a further significant rise in May. 

Key quotes

“The April unemployment rate (UR) was less than expected (14.7% versus consensus of 16.0%) and the drop in payroll employment of 20.5mn was also less than the 22.0mn expected.”

“We think plausible adjustments to the headline unemployment rate push the effective number of unemployed to 42mn and the effective UR rate to 25.5%, higher even than the U-6 underemployment rate of 22.8%. If we treated underemployed in line with the U-6 methodology, our estimate would be 27.5%.”

“It does not look like May employment data will show improvement or even stability. The incoming data look consistent with the baseline UR breaching 20% in May, especially if the responses on ‘employed but not at work for other reasons’ change.”