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Next Friday, the US official employment report for May is due. Market consensus and also analysts at Wells Fargo expect a decline of 8 million in payrolls. They explain the key question is how many of the temporary layoffs will become permanent job losses. 

Key Quotes: 

“Before March, the biggest one-month decline in nonfarm employment in the last 70 years was March 2009, when payrolls declined by 800K. The 881K fall in March 2020 nonfarm employment was then followed by the unprecedented 20.5M decline in April. As we turn to May, our forecast is for another historic print of 8.0M jobs lost and for the unemployment rate to climb to 20%.”

“One metric we will be watching closely is the reason given for unemployment. The current recession has been marked by an outsized increase in individuals citing “temporary layoff” as the reason for their job loss.”

“Temporary layoffs rarely have much relation with the business cycle, whereas today nearly four-in-five workers believes their job loss is temporary. Just how many of these temporary layoffs turn into permanent ones remains the key question to be answered, in our view.”