MNI REALITY CHECK: US Jobless Rate Approaching 1930's Levels

--Wages Set To Fall Across U.S. As Supply of Workers Spikes          

By Brooke Migdon

     WASHINGTON (MNI) - U.S. payroll data due Friday will show that millions

more jobs were lost in May, pushing the unemployment rate closer to Great

Depression-era levels, weighing on wages as the supply of available workers

grows, recruiters and industry leaders told MNI.

     Key points from their comments ahead of the June 5 Bureau of Labor

Statistics' monthly employment report:

     **The unemployment rate is widely expected to spike for a second month,

nearing 20%, the highest since 1938. Job growth in states that re-opened in May

won't offset the devastating recent job losses as most businesses were unable to

operate at full capacity. 

     **The survey period for Friday's report likely missed most state

re-openings, as the cut-off point came mid-month.

     **Monthly wage growth likely slowed from the 4.7% increase in April that

was driven by significant job losses among lower-paid workers.

     JULIA POLLAK, LABOR ECONOMIST AT ZIPRECRUITER:

     Pollak said normally profitable industries are "being completely

slaughtered" by coronavirus shutdowns and plunging consumer confidence, forcing

companies to cap hours worked and cut pay.

     "Not just in the hardest hit service industries like restaurants, but also

in technology companies that are now under pressure to cut costs with ad

spending falling and the number of subscribers falling," she said.

     "They're just pulling out all the stops to avoid insolvency and are cutting

hours, cutting pay -- even cutting nominal pay in some cases," she said.

"They're converting salaried staff to hourly, and then capping their hours."

     Pollak also voiced concern that many current layoffs will become permanent,

likely pushing unemployment higher for longer.

     TOM GIMBEL, CEO AT LASALLE NETWORK:

Gimbel said May saw downward pressure on wages, both in hourly and salaried

jobs, as the supply of available workers was markedly higher than the supply of

jobs.

     "Even in the salaried space, there's a lot more supply and you're going to

see salaries regress," Gimbel told MNI. 

     KEN SIMONSON, CHIEF ECONOMIST AT THE ASSOCIATED GENERAL CONTRACTORS OF

AMERICA:

     Simonson said about 24% of construction companies said they had added

workers in May, including firms who had furloughed or terminated workers

earlier.

     "I think quite a few jobs were saved temporarily by the Paycheck Protection

Program loans," he said in an interview, adding that 80% of firms in May had

indicated that their application had been approved and were receiving money from

the program, citing AGCA survey data. 

     He voiced concern that more job losses would come if President Donald Trump

does not sign the PPP reform bill passed by the Senate this week or Congress

fails to pass additional infrastructure funding legislation.

     Project cancelations continued in May, Simonsen added, threatening further

job losses ahead. 

     DANIEL MORGAN, FRANCHISE OWNER AT EXPRESS EMPLOYMENT PROFESSIONALS IN

BIRMINGHAM, ALABAMA:

     Morgan said his recruiting business was down 40%-45% in May, essentially

unchanged from April, though still a slight increase from a 50% decline in

March.

     Morgan told MNI that some employers are still struggling to compete with

enhanced unemployment benefits, which offer furloughed or laid off workers an

additional USD600 per week on top of their state benefits through July,

particularly in the temporary positions.

     "There is no employee that is going to take the risk of losing their

unemployment benefits to work for a few weeks and then not be able to get those

benefits back," he said.

ANTHONY NIEVES, CHAIR OF THE INSTITUTE FOR SUPPLY MANAGEMENT NON-MANUFACTURING

BUSINESS SURVEY COMMITTEE:

     Non-manufacturing payrolls took another hard hit in May despite state

re-openings, Nieves said in an interview.

     Many businesses still aren't able to operate anywhere near full capacity

because "phased" re-openings require that some social distancing guidelines

remain in place, he said, meaning only some furloughed or laid off employees

were called back to work in May. Service-sector employment likely won't come

back "full force" this year.

     **Initial unemployment claims neared 12.2 million during the reference

period for Friday's report. Analysts expect May nonfarm payrolls to fall by 8

million after plunging 20.5 million in the April report.

--MNI Washington Bureau; +1 202 371 2121; email: brooke.migdon@marketnews.com

[TOPICS: MAUDS$,M$U$$$,MT$$$$,MX$$$$]