Last week’s employment print surprised markets in being worse than anticipated, and this week the surprise continues. US weekly jobless came in just outside of estimates, with the most recent print of 1.01 million almost in line with the 1 million that analysts had estimated for the week ending 22 August. So while the trend in increasing claims seems to be moderating, the employment picture in the US is still truly dismal, with almost 14.5 million Americans on continuing unemployment claims. As politicians on the Hill battle out further rescue packages, the damage from their continued inaction could be leading to permanent unemployment levels consistent with what is normally seen in a depression, rather than a recession.
Coupled with this employment release, we had the preliminary US GDP number for the quarter (this being the second estimate following the advance print we had three weeks ago), and to which markets have already baked in the damaging economic effects of the coronavirus. An annualised decline of 31.7% is modestly better than the first blush figure of -32.9%, but it is still bad - there are no other words for it. The positive news is that if markets have become addicted to the largesse of central banks (from which we will hear more from Jerome Powell later) and have largely ignored the facts on the ground from these economic releases, then any improvement in them from here, which seems more than likely (with Q3 GDP estimates of a 17% bounce back), should allow for continued (over)enthusiasm as focus returns to the hard economic data.