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

The US unemployment rate jumped in April to a record high to 14.7%  Analysts at Standard Chartered estimate the effective unemployment rate stands at 25.5% and they see a further significant rise in May. According to them, investors will find optimism harder if initial and continuing jobless claims do not improve.

Key Quotes: 

“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%.”

“Bad data for the mid-March to April period is largely anticipated by investors; these data were neither good nor bad enough to force investors to adjust expectations. We expect the May labour data to show deterioration at a slower pace, but think that investors are looking at the balance between initial and continuing claims to assess the pace at which reopening would lead to better labour-market outcomes.”

“A drop in continuing claims would be viewed as a very positive signal, pointing to rehiring, because few workers are running out of unemployment benefit eligibility.”