While yesterday afternoon’s US jobless data showed an improvement on the prior week, it was nevertheless disappointing – although as we highlighted last Friday (please see here), there’s a lot of confusion and distortions in the data right now.
Initial jobless claims came in at 1.51m for the week ending Saturday 13 June 2020. Although this represented the 11th consecutive decline in reported job losses, it was down just 58,000 from the previous week’s reading of 1.57m (revised up from 1.54m). Interestingly, Texas reported the biggest increase in the initial claims over the week (up 4,219), while Florida reported the biggest decline (-25,863) – clearly highlighting the confusion and distortions in the employment market and data readings, given both of these states have seen increases in coronavirus cases after lockdowns were lifted and their economies reopened.
Continuing claims (which is a better indicator of ongoing US unemployment) was equally disappointing as this only decreased to 20.54m for the week ending Saturday 6 June 2020, compared to 20.93m the previous week (which was also revised upwards from 20.61m) – hopefully this disappointingly slow trend will start to accelerate as we approach the end of July, given the announcement that the $600 weekly unemployment benefits will stop (please see here).
Although the claims data wasn’t as good as we would have liked, the Philadelphia Fed Business Outlook Survey mirrored Monday’s (15 June 2020) excellent US Empire State Manufacturing Survey for general business conditions (please see here).
The Philadelphia Fed index rose to 27.5 for June. Not only was this well above the average economist estimates of -21.4, it was 70.6 points above May’s -43.1 reading and suggests the level of activity is quickly starting to return to pre-coronavirus levels (i.e. a ‘V-shaped’ recovery).
Additionally, in the UK this morning, retail sales data for May showed promise, coming in 12% higher than April. Although, unsurprisingly given non-essential stores were still closed during the month, sales in May were 13.1% lower than they were in May 2019.
These surveys suggesting a V-shaped recovery, together with unprecedented government and central bank stimulus and the very impressive rebound in UK & US retail sales (please see here), should be positive for global equity markets over the long-term. As Dame Vera Lynn sang: “Your window pane, may show a world that is grey. Clouds drift away, after the rain”.
Investment Management Team