This morning the weekly jobless claims were released as usual at 8:30 am EST in the United States. This figure is a calculation of all who in the prior week filed initial jobless claims with their state unemployment office.
The number was estimated to be around 1.6 million, which the prior record in 1982 was just under 700,000. Thus, we knew this was going to be a record day. However, on the release, it was learned that nearly 3.3 million new jobless claims were filed last week. This was a substantial increase from the prior week which was just over 200,000.
While the huge number this week was a bit of a surprise, economic analysts were sure it was going to be big, but they just couldn’t predict how large the increase would actually be. By now, the world is quite familiar with the COVID19 virus, and in the United States, with many businesses having close under mandatory order, while other companies are merely tightening their financial belts, the job situation is becoming alarming.
However, the S&P 500 has rallied more than 4% on the day (Thursday March 26), and while the U.S. dollar has sold off today, the USD has been very strong for several days, and today most of the selling was before the jobless claims number. In other words, it seems that the markets are shrugging this record number off.
The Market Sees All
Why is this important? By now, we have a much better idea of what to expect from the COVID19 virus given there are several projection charts that give guidance as to when to expect a flattening of the curve once the social isolation policy has been in effect for several weeks. As I noted last week, it’s possible that for now, the COVID19 is more likely to offer positive surprises than negative ones.
However, what we do not know is how much this situation will affect employment in the U.S., nor will we know how company earnings are affected for multiple quarters. While there is a stimulus bill that has made its way through congress showing that there is light at the end of the tunnel, for now, it is still no time to remove all caution.
The jobs numbers are big ones, and the release next Thursday, as well as the March non-farm payroll number to be released on Friday April 3, are going to be worth paying attention to. Employment is one of the barometers of economic health. Simply stated, if people are not working, or if they are afraid of losing their jobs, then they are going to spend far less, which in turn affects corporate earnings.
It’s telling that during the recession of 2008-09 the stock market did not reach a bottom and began to turn higher until the weekly jobless claims topped out. So in short, we are not out of the woods just yet.