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US economic data enters the twilight zone

Friday, August 07, 2020

We seem to be in the twilight zone of economic data releases where not much is making sense. US employment numbers as measured through the ADP non-farm employment change were wildly off consensus on Wednesday showing only 167,000 new hires for the month of July against expectations of 1.2 million new workers. Then we had contradictory ISM numbers which sharply beat expectations which normally would correlate with a healthier jobs market. On 7 August, any sense of a gloomy jobs picture was smashed through the Bureau of Labour Statistics measure of non-farm employment change, which normally should mimic to a degree the ADP report that precedes it by a few days. Instead we saw 1.76 million new workers during the month against expectations of a 1.5 million print. Bear in mind that the May number saw over 20.5 million jobs lost, so this increase, while certainly impressive by past historic standards, is still way off getting the jobs market anywhere near back to normal. Now 9 million workers have been re-employed but there are still over 11 million who have not. As smaller businesses go to the wall with insufficient government support or access to extended finance, the outlook is far from encouraging, whatever the stock market may be pointing to.

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