Promising Signs from the US Labor Market
Yesterday was full of US economic data, but investors waited for one data in particular – the Unemployment Insurance Claims and Continuing Claims. While second-tier data in normal economic times, it shows the number of people applying for unemployment benefits the week before.
Coupled with the Continuing Claims, that shows the number of people still on unemployment benefits (i.e. people that did not find a job in the meantime), it offers a glimpse into the impact the coronavirus has on the US job market.
The data showed that another 2.1 million Americans filed for unemployment benefits – bringing the total number of workers applying to over 40 million in the last ten weeks. Incredible numbers, having no comparison with any other period in modern history. For a better idea, the number of people that applied for unemployment benefits in the last ten weeks is larger than the population of the state of California.
Some Encouraging Signs Do Appear
From a purely statistical point of view, there seems to be a declining trend in those applying for unemployment benefits, albeit it is plateauing in the millions. More importantly, for the first time since this crisis began, continuous jobless claims fell when compared with the previous week.
The data means that (some) people are getting back to work. If this is the start of a sustaining trend, it shows that people are also coming off the unemployment roles.
Therefore, when interpreting unemployment data, it is crucial to have a look at both ways – people that enter unemployment and those that exit. As long as the first category is bigger than the second one, the economy has a hard time bouncing back. Yet at the moment the second category exceeds the first one, it is time to consider economic recovery.
US Durable Goods and US Personal Consumption data also came out yesterday, and they both beat expectations, albeit showing negative values still. Slowly but surely, as more states end the lockdown, the data will improve moving forward.
The same can be said about other economies in the world. China is up functioning again to over 85% of its capacity, although it does not currently receive high levels of factory orders from the Western economies. The current health crisis created the incentive of keeping some of the manufacturing within national boundaries and reducing dependency on a single country as before.
Moving forward, traders and economists will keep an eye on the economic data to be released – when leading economic indicators turn around, the recovery has already begun.