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Worst NFP of All Time




As expected, NFP data today was far and away the worst on record, across pretty much every metric, indicating that April was the worst month in the history of the US labour market.


20.5mln jobs were lost in April, slightly less than the 21.8mln expected. We actually know many more jobs than this have been lost, given that Weekly Jobless Claims data has shown 33mln first-time unemployment insurance benefit claimants in the past 7 weeks. 


The unemployment rate spiked to 14.7%, not quite as bad as expectations for 16%. Still, the official jobs report noted that unemployment could be 5% higher if people who were still classified as employed but were not present at work was counted (i.e. businesses that have not fired people, just had to stop trading and all their employees aren't getting paid). 


Needless to say, this is the worst NFP data of all time. But that was heavily priced in and expected, hence the lack of reaction. Markets are now focused on the shape of the recovery, not the depth of the decline. 


How did markets react? 





Barely a blip. 


A bad April print was heavily expected, given the weekly labour market updates, we have been getting via Initial Jobless Claims. They show that 33mln Americans have filed for unemployment benefits for the first time over the past 7 weeks. 


Pretty much, we all knew it was going to be grim. 5mln this way, 5mln that way, what does it matter at this point? 


Markets only care now about the shape of the recovery. This is something I have discussed before. 


The shape of the recovery depends on a few things; 


  1. Health/Covid-19; Do we develop a cure? Is there a second spike in infections after lockdowns are eased? 

  2. Lockdown easing; how quickly can countries reopen their economies without Covid-19 cases spiking again? How much of the economy is left when countries reopen (i.e. did central banks and governments manage to save enough businesses from going bust?)

These are the kinds of immediate questions being asked by the market. The better they see the potential outcomes, the more risk on markets will be!


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