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US jobs market remains under pressure

Thursday, October 01, 2020

The print for the number of individuals who filed for unemployment insurance for the first time during the past week fell marginally more than expected to 837,000. The jobs market in America remains severely impaired with many companies now starting to lay workers off now the effects of the Coronavirus Aid, Relief, and Economic Security (CARES) act expire - US airline companies in particular have announced large scale redundancies recently. Although it is generally viewed as a lagging indicator, the number of unemployed people is an important signal of overall economic health because consumer spending is highly correlated with labour market conditions and personal incomes have tumbled, more so than expected, in part due to the expiry of fiscal support. While the unemployment picture still looks depressingly bleak, the market reaction to this may not be dramatic as there is some implied optimism of progress on further fiscal stimulus being announced soon once Treasury Secretary Mnuchin and House Leader Pelosi meet on 1 October. If this does not come to pass soon then the continual hit to consumer spending will be large and slow down any recovery dramatically.

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