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Market Wire
US Labor Market Starts to Crack

Matt Eidinger March 19, 2020

The US labor market registered a much weaker reading this morning, largely due to ongoing concerns related to the economic impact of the coronavirus pandemic.

The US Department of Labor reported that new weekly claims for unemployment insurance rose 70,000 to 281,000 last week – up 33%, and the highest weekly reading since September 2017.

In an uncharacteristic move, the Department of Labor issued a special remark related to the weekly spike in claims, saying, “During the week ending March 14, the increase in initial claims are clearly attributable to impacts from the COVID-19 virus. A number of states specifically cited COVID-19 related layoffs, while many states reported increased layoffs in service-related industries broadly and in the accommodation and food services industries specifically, as well as in the transportation and warehousing industry, whether COVID-19 was identified directly or not.”

The more reliable four-week moving average rose to 232,250 – also a multi-year high. Continuing claims indicated 1,701,000 Americans were on unemployment insurance as of March 7. It should be noted that the data for continuing claims are one week behind new claims data and do not fully reflect the impact of more recent measures taken to curb economic activity in order to slow the spread of Coronavirus.

Separately, the Philadelphia Federal Reserve Bank released its monthly manufacturing survey – and it’s a shocker as well. Falling a record 50 points from 36.7 to -12.7, the March manufacturing survey paints a picture of a resilient but concerned business community. According to the data, indicators for general activity, new orders, and shipments fell precipitously during March.

Despite concerns about current conditions, participants who were surveyed did express optimism regarding conditions six months from now. Indeed, the diffusion index for future economic activity only fell 10.2 points from 45.4 to 35.2.

It should be noted that the Philly Fed survey was conducted only up until March 16 and is somewhat stale.

As has been the case most days this week, movement in currencies was volatile in the minutes after 8:30 – the greenback traded through a wide two-cent range against the loonie and a half-cent against the euro – but this can be attributed to general market conditions instead of this morning’s economic data.

Currency markets have been in complete and utter disarray this week, with coronavirus concerns intersecting with profound changes in monetary and fiscal policy to reshape international capital flows.

Actions taken by governments around the world to effectively shut down local economies have caused demand for energy to collapse, just as Saudi Arabia’s price war with Russia has escalated. West Texas Intermediate and Western Canadian Select – Canada’s benchmark oil product – have both fallen to the lowest levels in decades, and the Canadian dollar is trading near a four-year low against the US dollar.

The trade weighted dollar index (DXY) has continued to rise to new highs as a result of the fear that has taken hold in global financial markets – touching 102.25, the highest level since late 2016.

As fears related to Covid-19 continue to mount, businesses around the world will likely be forced to send more workers home, turn customers away and shut down operations. As we continue to move through these events, leading economic indicators such as weekly jobless claims will continue to become more important in order to gauge the short- and medium-term economic impact of the virus.

Matthew Eidinger
Fintech Specialist, Dealing Operations

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