Kamis Sep 24 2020 13:09
2 min
Long and slow: the road to recovery is a winding one. US initial jobless claims rose to 870k last week, indicating ongoing weakness in the labour market as the country struggles out of recession. This was a small increase on the week before and was ahead of market expectations.
Continuing claims declined only a fraction, to 12.58m. The previous week’s level was revised up 119,000 from 12,628,000 to 12,747,000. Unemployment fell marginally to 8.6% after the previous week’s number was revised up to 8.7%.
On a more encouraging note, the total number of people claiming benefits in all programs for the week ending September 5th was 26,044,952, a decrease of 3,723,513 from the previous week.
Nevertheless, the more recent rise in initial claims is a worry that the momentum in the labour market has faded, which would chime with the kind of warnings that Fed officials have been laying on thick this week.
Futures dropped sharply with the Dow called down ~120 pts around 26,640 and the S&P 500 down ~20pts around 3,214 which would take out the week’s low at 3,229, a two-month trough that sits neatly on the 10% correction level from the recent all-time intra-day high at 3,588. Immediate support emerged at 3212.
Sentiment appears very weak with the downside bias in favour. With economic indicators failing to deliver lift-off and stimulus apparently off the table before the election, there needs to be a positive catalyst to get the bulls back in the game.
Otherwise with election risks and a worsening outlook for the recovery, we need to consider further losses as we approach the election.
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