The number of Americans applying for unemployment benefit rose by a record 6.65m last week. This, together with last week’s 3.31m claims, means that nearly 10m Americans have lost their jobs in the past two weeks – and according to Bloomberg data, this is more than the number of jobs lost during the whole of the 2008/9 global financial crisis induced recession.
Unfortunately, with more US states ordering people to stay at home, coupled with the high number of US employees that have jobs with a high risk of layoff (such as restaurants, hairdressers, retail and manufacturing), unemployment claims of this magnitude could continue for several more weeks – meaning that it’s not inconceivable that US unemployment could rise towards 15 or even 20% in the coming weeks.
This clearly highlights the devastating economic impact that we have previously warned about, as the global economy has effectively hit a brick wall thanks to the coronavirus lockdown and containment measures.
While 10m unemployment claims in two weeks is clearly not great news, some perspective is needed: the coronavirus outbreak is likely to be a transient issue and thanks to the stimulus measures that governments and central banks have provided, it should mean that the global recession that we are clearly heading towards will be short and sharp, rather than severe or protracted. Hence, we are maintaining our view that we will start to see an economic recovery towards the end of the year.
Consequently, we would like to repeat our previous statement that until we finally get to the other side of this horrible coronavirus outbreak, equity market volatility will remain elevated.
The problem is that, at the moment, we can’t say with any certainty whether the “other side” of this outbreak is weeks or months away – and as we have said previously, equity markets hate uncertainty and thanks to the scars from the global financial crisis in 2008/9, equity markets have tended to react disproportionately to any uncertainty or disappointment, hence the savage sell-off in equity markets over the past six weeks.
Looking ahead, later today we have the US non-farm payroll data, while next week we have the minutes from the last Fed monetary policy meeting (held on 18 March 2020) and then on Thursday (9 April 2020), we have US jobless claims, which we will be watching closely after this week’s record 6.65m claims.
UK data includes: consumer confidence; new car registrations; GDP for February; and Industrial and Manufacturing Production data. Elsewhere, we have Chinese CPI and Eurozone investor confidence.
Investment Management Team