Initial jobless claims fell 4,000 last week to 211,000, indicating no increase in layoffs. The markets had forecast a 2,000 rise in claims to 218,000 last week. Despite the escalating coronavirus outbreak, which has now been declared a global pandemic by the WHO, the labor market remains in good health.
Key Takeaways
- Initial jobless claims for the week ended March 07 dropped 4,000 to 211,000 vs. 218,000 expected.
- Claims for the week prior came in at 216,000, and jobless claims have hovered near the low 200,000s since the outset of the virus pandemic.
- The less-volatile four-week average rose to 214,000 from the 212,750 average the week before.
The labor market continues to exhibit good health according despite a hiring slowdown throughout the past year and recessionary pressure stemming from the virus outbreak. Economists are now warning that a global recession may be on the way due to the severity of the outbreak which has resulted in over 10% of the world’s population being quarantined at some point, and travel between many countries now prohibited.
The stock market has seen record declines in the last two weeks in the resulting panic, and crude oil prices are tumbling amid a price war between Russia and Saudi Arabia due to reduced demand for travel. While the situation is escalating, the US economy may well be strong enough to withstand the effects of the pandemic without entering a recession. Unemployment has fallen back to a 50-year low of 3.5% as of last month, and hiring picked up on a monthly basis with 273,000 new jobs breaking the trend seen over the past year.
Jobless claims up slightly in mid-February. https://t.co/dRXxH4monV pic.twitter.com/fdQBduPQ4x
— Midwest Title (@MidwestTitleMI) March 11, 2020
The Trump administration is now allowing Americans to delay paying their income taxes past April 15, the typical deadline for doing so. This measure is designed to alleviate the financial burden of the coronavirus pandemic on the US economy. President Trump also announced that travel from 26 European countries is banned pending further notice, in an effort to contain the spread of the coronavirus. India, home to 1.3 billion people, has also closed its borders due to the outbreak.
Market Reaction
Gold prices have seen strong selling pressure in today’s session. Spot gold last traded at $1,577.61.oz, down -3.89% with a high of $1,648.70/oz and a low of $1,577.61/oz. It’s possible that traders are selling any assets that have appreciated recently to offset losses suffered in stocks and equities, cashing in their safe-haven asset gains. US stocks are now down 20% from last month.
One financial analyst released an email dispatch referring to the markets as in “complete crisis mode,” saying:
“Past economic data has zero influence on investors’ decisions; central bank emergency easing policies are not being effective and politicians’ actions are only adding more confusion. The one thing that investors are monitoring is how fast the coronavirus is spreading. President Trump’s address to the nation last night was underwhelming. It shows that the U.S., like many other countries, is unable to provide the right action in response to the virus spread. A global recession seems impossible to escape and a massive decline in corporate earnings is inevitable. What is even more worrying is the risks that come with such a recession. Corporations across the globe are over-leveraged after more than a decade of low interest rates, and companies with weak balance sheets are extremely vulnerable to such economic shocks.”
