The negative impact of the coronavirus pandemic on the U.S. labor market will begin to become more apparent this week.
Friday’s nonfarm payrolls report for March is expected to show a large drop amid the lockdown in many cities and states that has shuttered businesses and sparked a massive wave of staff layoffs. Thursday’s jobless claims report will also be in focus after last weeks jump to historic highs.
President Donald Trump’s response will be closely watched for any indications of how much he is leaning towards easing restrictions, despite the ongoing healthcare crisis. Meanwhile, Chinese PMI data may offer indications that the world’s second- largest economy is starting to recover after slumping since the start of the year and the first quarter of 2020 is drawing to a close. Here’s what you need to know to start your week.
1 – U.S. labor market impact
Due to the timing of the survey period for the U.S. nonfarm payrolls report for March it likely preceded the worst of the impact on the labor market. Economists still expect Friday’s figures to show a loss of 100,000 jobs.
A significant overshoot of that and the unprecedented $2 trillion stimulus package approved by Congress could suddenly start to look inadequate. The government’s package includes a $500 billion fund to help hard-hit industries and a comparable amount to fund direct payments of up to $3,000 apiece to U.S. families.
Ahead of that, Thursday’s jobless claims report is expected to show another massive wave of new claims for unemployment benefits in the week to March 28, after they surged to a record 3.28 million in the preceding week.
2 – Trump walks back remarks about faster reopening
Investors will be closely following developments in the White House after President Trump appeared to back off from remarks he made last week about getting the economy going again by Easter Sunday.
Trump said Saturday he was unsure about whether the United States will reopen for business by April 12th following shutdowns in major cities across the country.
Some investors believe an earlier return to work would boost the U.S. economy, but health experts say a haphazard patchwork of restrictions across states could make the coronavirus impact worse. Cases in the U.S. soared past 115,000 on Saturday, the highest number in the world.
Trump, who is concerned about the economic repercussions of an extended shutdown of nonessential business has accused his Democratic critics of wanting to keep the economy in paralysis to improve their chances of ousting him in the Nov. 3 election.
3 – Chinese PMI data
Already Chinese factories’ Jan-Feb profits have hit their lowest in a decade and Tuesday’s PMI survey data for March will very likely reveal more pain. And just like everywhere else, job losses are mounting up, regardless of how many cheap loans are being offered to businesses.
While China seems to have contained the coronavirus, allowing work and travel to resume the major economic damage may still be to come. With infections climbing exponentially in the U.S., Europe and the other markets China exports to, and with supply chains in disarray, China being hit by a supply-demand shock.
4 – Eurozone data
There is a lot of economic data coming out of the Eurozone this week and Monday’s March economic sentiment data will offer insights into how businesses and consumers assess the situation, even though is predated new restrictive measures put in place since the survey was conducted.
The slump in oil prices means that March’s inflation will have tumbled, while reports on retail sales and unemployment are for February, so will still not show the full magnitude of the economic fallout from measures put in place to try to contain the coronavirus pandemic.
5 – Q1 wraps up
Few will regret the end of the first quarter of the year. Fears of a U.S.-Iran war gave way to the coronavirus pandemic which JPMorgan analysts have estimated will have pushed the world economy into a 12% contraction in the three months to March. The quarter saw the most brutal global equity collapse since the Great Depression, exacerbated by a 60% oil price slump.
The start of Q2 may not bring much relief, with coronavirus still spreading rapidly and keeping large parts of the global economy shuttered. Banks have rushed to slash Q2 forecasts too, so expect more turbulence on financial markets.
But markets have rebounded and may actually end Q1 on a high after governments pledged a $5 trillion stimulus effort and major central banks slashed rates and restarted asset purchases. Investors will be watching to see if infection rates are peaking, but there is still no certainty about when the coronavirus will be got under control.
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