Weekly Unemployment Claims show that there were an additional 3,170,000 new first time claims filed last week, which was slightly above the market’s expectation of 3,050,000. This brings the 7 week total to a staggering 33,500,000. Since not all people who file are granted benefits, and since some have now returned to work, the total number of Americans receiving benefits is 22,600,000. With many workers heading back to work this week, we can expect to see a sharp move lower when next week’s report is filed. However, not all furloughed workers will have a job to go back to, so the longer term rate is still expected to be much higher than before the Covid-19 shutdown.
One of the greatest risks to the longer term impact of Covid-19 is the lasting relationship between the US and China. President Trump is threatening to back out of the trade agreement that was inked shortly before the rapid spread of the virus. Top Chinese and US trade officials are scheduled to speak as early as next week. The hope is that neither side will abandon the agreement and that both will live up to the expectations outlined. If the terms are not followed by China, we could see President Trump pull out of the deal, which would have a damaging impact to the US and global economies. Given China’s fragile state, I believe they will be eager to fulfill their end of the bargain.
As has been the case for weeks, there remains little incentive to float. We will maintain a locking bias.