The US employment data that we saw last week (3000k expected vs 4800k actual), while positive does not imply that we are to see a fast recovery to the labour market and in turn the overall economy.
The reality is approximately only a 1/3rd of jobs lost in the peak of layoffs this year, have represented as new work opportunities for a still struggling population.
To us, this presents as an indicator that the target of seeking sustainable and full employment is going to be a much longer road than initially anticipated by many.
While the initial uptick in Jobs has seen rapid improvements, the most recent data suggests it is slowing, We feel the remainder of data for 2020 will follow the same or at the least a similar path.
With the resurgence and new daily records of Corona virus cases currently being seen in the United States, then the potential for the jobs market recovery is likely to have much more incremental changes in its improvements.
We feel that we are likely to see a pause or even a reversal in the current employment trajectory in at least a few states where COVID-19 is running rampart. California, Texas, Florida, and Arizona are the first states that spring to mind who may have to go back on their lockdown easing to flatten the curve…again.
The obvious implications of this are the same as last time, the causation for mass unemployment due to lockdown measures, isn’t a reduction in hours worked, but the catastrophic destruction of small and medium enterprises.
Once these businesses go, they don’t usually reopen doors rapidly as is the nature of being an SME. Those that only just made it through with increased and likely still increasing debt will again suffer and they my not be able to survive a 2nd lockdown.
EUR/USD, Hourly – Illustration of US Employment Data Announcement
At the time of release last week Thursday, the USD devalued at the announcement of slower jobs growth.