April 16, 2020
We see the jobs report as showing good and bad indicators for the economy.The good news is weekly jobless claims have likely peaked. The bad news is the monthly job loss and the unemployment rate appear to be headed higher for the foreseeable future due to the employment dynamics, which are now in recessionary mode.

What Happened

Initial weekly jobless claims were 5.25 million for the week of April 11, a decrease of 1.37 million from 6.62 million claims in the prior week (April 4). Accordingly, it appears that initial weekly jobless claims peaked during the week of March 28.

State-Level Claims

The state-level trend solidifies our view that initial weekly jobless claims have peaked. Just four states had week-over-week increases of more than 1,000 for the week of April 11: Colorado (up 58,747), New York (up 51,498), Florida (11,408) and South Carolina (up 1,113).

Furthermore, of the top ten in terms of total claims, New York is the only state that has not declined in the past three weeks. There have been reports of New York claims system outages, which may explain some of the time lag compared to other states. That said, it is clearly not the volume of claims in New York; California peaked three weeks ago at 1,058,325 claims, nearly three times as many claims as NY’s 395,949 last week. It is more likely that the lag was related to New York having roughly half of the total confirmed cases of COVID-19 in the United States.

Near-Term Employment Outlook

Despite the apparent peak in initial jobless claims, other employment-related data will continue to deteriorate in the coming months. For instance, assuming a one-to-one pull through from 22 million claims during the past four weeks turns into monthly job losses in the coming months―which is not typically the case―and would equate to an unemployment rate of roughly 14%.

We believe that several of the programs within the CARES Act, most notably the paycheck protection plan, will help mitigate additional initial claims. Moreover, we expect that a portion of the initial claims during the past four weeks will not become permanent job losses as some business recall workers after accessing the needed capital via government programs, private loans, etc., to make payroll once stay-at-home restrictions are lifted.

Employment Dynamics Now in Recession Mode

The COVID-19 outbreak has changed the employment dynamic. Unfortunately, now companies are just dealing with a recession, meaning that typical recessionary behaviors on the part of businesses are now being undertaken.

Business leaders will rightly begin to rethink their long-term plans; first, they will adjust for their immediate current needs then right-size for their new future. In some cases, particularly for public companies, a crisis can provide the “cover” to make difficult long-term strategic business decisions without the normal scrutiny from investors and analysts. For instance, an airline that previously had ambitious orders for new planes can simply cancel the order or have the leverage to convert it to another type of aircraft with little or no penalty from the maker or investors. Similarly, some firms may choose to exit business lines that were marginally profitable prior to the crisis; again, without the typical questions from the investors regarding the about-face.

Companies can also use the crisis to permanently cut staff, or even selectively cut employees that were previously viewed as important, or perhaps outsource some functions. Investment in technology or other automation will also play a part in further reducing headcount for firms.

We anticipate that business shifts like this will unfold in waves in the coming months―albeit much smaller than the initial wave―as companies pivot from simply temporary emergency moves to long-term strategic shifts. Though the difference for employees may be subtle, the macro implications are substantial. In other words, some commentators are anticipating a quick recall of all workers once COVID-19 restrictions are relaxed; however, that is just not how recessions work for most businesses.

As a result, while some of the CARES Act programs will mitigate near-term job losses, these “altered” dynamics will spur a protracted period of elevated unemployment, which is common during recessions.

Lastly, this altered dynamic will also impact wages and incomes, including bonuses, etc. Pay and worktime were temporarily reduced; however, the wage impact tends to be more permanent, taking years to recoup for most workers.

Bottom Line

The bad news is that monthly job losses and the unemployment rate appear to be headed higher for the foreseeable future, as the spike in initial claims translate into permanent job losses. Moreover, the employment dynamics have changed to the typical recessionary mode, which will exacerbate job losses.

The good news is that weekly jobless claims have apparently peaked. Also, with initial claims being so concentrated in a shorter period rather than spread out for months or over a year or longer, as occurs during the typical recession, it could accelerate the recovery process. Furthermore, the massive monetary and fiscal responses, including the CARES Act and other factors, should blunt the downside and hasten the recovery.


This material was provided by SunTrust Private Wealth Management for use by BB&T Wealth.

Advisory managed account programs entail risks, including possible loss of principal and may not be suitable for all investors. Please speak to your advisor to request a firm brochure which includes program details, including risks, fees and expenses.

SunTrust Private Wealth Management is a marketing name used by Truist Financial Corporation and the following affiliates: Banking products and services, including loans and deposit accounts, are provided by SunTrust Bank and Branch Banking and Trust Company, both now Truist Bank, Member FDIC. Trust and investment management services are provided by SunTrust Bank and Branch Banking and Trust Company, both now Truist Bank and SunTrust Delaware Trust Company. Securities, brokerage accounts and /or insurance (including annuities) are offered by SunTrust Investment Services, Inc., BB&T Securities, LLC, and P.J. Robb Variable Corp., which are SEC registered broker-dealers, members FINRA, SIPC, and a licensed insurance agency where applicable. Investment advisory services are offered by SunTrust Advisory Services, Inc., GFO Advisory Services, LLC, BB&T Securities, LLC, Sterling Capital Management, LLC, Precept Advisory Group, LLC, and BB&T Institutional Investment Advisors, Inc., each SEC registered investment advisers.  BB&T Sterling Advisors, BB&T Investments and BB&T Scott & Stringfellow are divisions of BB&T Securities, LLC. Mutual fund products are advised by Sterling Capital Management, LLC.

While this information is believed to be accurate, SunTrust Banks, Inc., now Truist Financial Corporation, including its affiliates, does not guarantee the accuracy, completeness or timeliness of, or otherwise endorse these analyses or market data.

The opinions and information contained herein have been obtained or derived from sources believed to be reliable, but Truist Financial Corporation makes no representation or guarantee as to their timeliness, accuracy or completeness or for their fitness for any particular purpose. The information contained herein does not purport to be a complete analysis of any security, company, or industry involved.  This material is not to be construed as an offer to sell or a solicitation of an offer to buy any security.

Opinions and information expressed herein are subject to change without notice. STIS and/or its affiliates, including your Advisor, may have issued materials that are inconsistent with or may reach different conclusions than those represented in this commentary, and all opinions and information are believed to be reflective of judgments and opinions as of the date that material was originally published.  STIS is under no obligation to ensure that other materials are brought to the attention of any recipient of this commentary. 

Comments regarding tax implications are informational only. Truist and its representatives do not provide tax or legal advice. You should consult your individual tax or legal professional before taking any action that may have tax or legal consequences.

Investments involve risk and an investor may incur either profits or losses. Past performance should not be taken as an indication or guarantee of future performance.

STIS/STAS shall accept no liability for any loss arising from the use of this material, nor shall STIS/STAS treat any recipient of this material as a customer or client simply by virtue of the receipt of this material.

The information herein is for persons residing in the United States of America only and is not intended for any person in any other jurisdiction.

Investors may be prohibited in certain states from purchasing some over-the-counter securities mentioned herein.

The information contained in this material is produced and copyrighted by Truist Financial Corporation and any unauthorized use, duplication, redistribution or disclosure is prohibited by law.  

STIS/STAS’s officers, employees, agents and/or affiliates may have positions in securities, options, rights, or warrants mentioned or discussed in this material.

Asset classes are represented by the following indexes. An investment cannot be made directly into an index.

©2020 Truist Financial Corporation. BB&T, SunTrust®, the SunTrust logo, and Truist are service marks of Truist Financial Corporation. All rights reserved

CN2020-0900 EXP12-2020