Based on estimates, tomorrow’s unemployment report for April 2020 is expected to be one of the worst on record. Econoday has the consensus estimate at 21.5 million lost jobs in April, within a range of 8.6 to 30 million. There is no prior figure that can provide context for these drops as even the financial crisis of 2008/2009 resulted in monthly job losses near only 1 million.
Naturally, the unemployment rate is expected to increase to around 16.4% from the 4.4% we saw in March. This staggering number of newly unemployed is uncharted territory for markets to digest.
Beyond the large spike in unemployment, there are additional considerations in play. Tomorrow’s report will also reflect the hiring activity of the growing companies maintaining the country’s supply needs. Amazon (AMZN) and Walmart (WMT) have previously communicated their elevated hiring activity over the past two months and these figures could help offset the expected negative market sentiment.
Another factor is the number of jobs which may not return when businesses reopen, specifically the businesses which might not reopen. The concern is whether or not some companies will resume operations at all after such a devastating blow. This is the portion of the recovery that will not be “V” shaped.
When interpreting these reports, it is important to keep in mind the data does not tell the full story. The total economic impact of COVID-19 will not be fully visible for months or potentially years similar to the impact policies resulting from the 2008/2009 global financial crisis are still having on today’s environment.
This is what makes markets so fascinating in uncertain times – they react in real time to both retrospective and forward-looking information.
For traders, these new events can create a volatile trading environment. It is important to have a plan in place to manage the risk of your account appropriately. Protecting yourself should be the first priority when trading news events such as this.
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