Daily Commentary BY THE CURVE TEAM –

Unemployment Dichotomy

3rd July 2020

Data releases over recent months have seen many unexpected quirks, no more so than current Jobs data.

As governments around the globe brought in policies to support their economies, many of the usual key data point have been skewed. Domestically with policies like Jobkeeper, the most accurate representation of the true number of persons out of work is currently not the headline unemployment number. As these policies are wound back it would be expected that normality resumes in the data but at the moment many quirks are arising.

Overnight we saw the early release of the unemployment figures for the US. They are arguably the most widely impacted developed nation from the Covid-19 virus and their unemployment figures show this. With the release of both payroll data and labour statistics we saw that the US unemployment reduced slightly to 11.1% under the payroll calculation and 12.3% under the labour statistic model. The figures showed 4.8 million back to work in June which cumulatively, amounts to roughly 34% of jobs being recovered since the peak in unemployment. Most peculiarly, is that there are 1.5 million more people on jobless claims than there are unemployed.

As virus number in the US continue to rise and the reimposition of lockdowns measures certainly not out of the question, we may see the percentage of long-term unemployed person continue to rise.

Domestically yesterday we saw the release of the May trade balance. In a similar vein to US employment whilst the headline figure was strong, a surplus of $8bn, a deeper look at the data showed cause for concern. Whilst the surplus was large the reason for this was a reduction in both exports and imports, the surplus being the difference of the two.

With imports reducing there is both a positive and negative implication here. Usually speaking a fall in imports is highly correlated with a reduction in domestic demand, people simply spending less. However, in the current circumstance, there is a large chance that some of this is the result of consumers substituting imported goods for domestically produced good. We certainly saw this recently with medical items like hand sanitisers, protective clothing and masks.

Matthew Dunshea

Client Relationship Manager