4 to 10 May: April jobs report paints a bleak picture of the US labour market

The latest jobs report in the US highlighted the enormous economic damage brought about by the coronavirus. In April, 20.5 million jobs were shed in the US economy, which in turn translated into a sharp increase in the unemployment rate, to 14.7% (vs. 4.4% in March). The jobless rate eclipsed the previous record of 10.8% registered during the Great Depression. The survey also showed a large number of workers who said they were ‘employed but absent from work,’ i.e. temporarily laid off, which does not show up in official statistics. To mitigate the longer-term impact of the economic shutdown, some states have already started to reopen with restrictions (e.g. South Carolina, Georgia, Texas, etc.). PMIs in the US signalled that the economic damage in 2Q20 would likely be larger than in the first quarter, as the Markit Composite PMI index (incorporating both manufacturing and services) fell to 27 in April, vs 40.9.

Rising stock indices in the US are in stark contrast with actual economic datapoints. In our opinion, the phenomenon can be explained by investors’ confidence in the Fed and the Trump administration, that the economic rescue packages are large and comprehensive enough to see a quick and pronounced economic recovery in the US. New data releases (April retail sales and industrial production) this week will help sense check the market’s hypothesis.

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