NFP Reading Plunges

It was a historic week for US data last week. Friday’s job report reflected record weakness in US labor market conditions.

Earlier in the week, we saw the worst ever jobless claims number, with the number of claimants soaring to 6.5 million from the prior week’s 3.3 million. To put this in perspective, the week prior to the start of the lockdowns in the US, only 221k people claimed unemployment.

On the back of this data, expectations for Friday’s headline NFP data were accordingly adjusted lower. Reuters’ poll of analysts forecasted -100k for March.

However, the data provided a visceral summary of the impact of the coronavirus crisis with a reading of -701k. This reading reflects a worse plunge than that suffered at the peak of the 2008/2009 global financial crisis which saw a reading of -651k.

Unemployment Rate Soars

Alongside the plunge in the NFP reading, the unemployment rate jumped from 3.5% to 4.4%. This was an increase of nearly a full percentage point.

The data raises concerning questions over the near future of the US economy. With the lockdowns in the US already extended to the end of April, this month’s data is likely to mark a continuation lower.

The extent of the economic damage of the virus to the US due is becoming clear in recent data points. However, while employment conditions have visibly suffered, the latest ISM PMI data sets have shown some resilience. Both the manufacturing and non-manufacturing readings came in higher than expected.

Manufacturing Holds The Line

The ISM manufacturing reading was below the 50-mark (47.8), reflecting a move into contractionary territory last month. Despite the lower result, this was still higher than the 44.1 reading forecast.

Indeed, the services reading was well above the expected 43.5 figure forecast. And, at 52.5, it means that the sector remained in expansionary territory last month. This is particularly encouraging given that service sector readings in the UK and Europe have plummeted over the last month.

Traders will, therefore, be closely watching this week’s unemployment claims. And, we could see some market volatility if an even lower figure is produced.

Traders will also receive the latest US retail sales figure this week. This is a key indicator for gauging GDP. A weak figure is likely to put further pressure on the Fed, which has already moved into unchartered territory with the start of unlimited QE.

USD Index Breaks Back Above 100

The dollar index has been steadily bought over recent days as safe-haven flows have favored USD amidst the downturn in US data. The Index is now trading back above the 100-level at 100.68 last. While above here, a further test of the bull channel top around 103 is likely, ahead of the multi-year resistance at 103.87.