On the face of it a slightly improving initial jobless claims yesterday of 712,000 versus 775,000 expected was a welcome fillip for markets to digest on the back of continuing positive coronavirus vaccine news. But let’s not get too ahead of ourselves here, it’s just one report and not necessarily one that will hold. There are still 20 million claims for unemployment in the US system (admittedly some of it fraudulent maybe) and that is far from a positive economic story. We have seen the food lines building in some states and as the unemployment relief programs come to an end at the turn of the year, there is still no stimulus plan agreed through Congress to replace them.
Higher daily hospitalisations and deaths leading to renewed regional lockdowns along with an expected dip in consumer confidence over the winter months as this pandemic continues is still not a good outlook. This afternoon, we saw the employment report for the full month of November with the non-farm employment change over the month of +245,000 much lower than expectations of +460,000 and an overall unemployment rate still uncomfortably high at 6.7%. The last month’s job recovery or lack thereof is pointing now to a W-shaped economic progression – one which we have been talking about for a while given the haphazard pandemic response from the soon-to-be departing administration.
The dollar has been reflecting the weakening economic outlook in the US since the start of the third quarter this year and this is reflecting in a vicious cycle into the employment picture. A weaker report than expected signals more pressure on Congress to come up with some relief plan urgently, although depressingly we don’t seem to have any progress on that front.