Jobless Claims Analysis: Peaking like the corona curve? Not so fast, permanent damage done, USD positive

• The US has reported another multi-million jobless claims statistic, yet below the previous week.
• Permanent damage has been done, as seen in continuing claims.
• The US dollar remains the "cleanest shirt in the dirty pile"

Another Thursday, another devastating Initial Unemployment Claims report. The US reported an increase of 5.245 million. After suffering over 6.6 million first-time applications in the previous week, thus showing some moderation in these initial claims.

Have we reached the peak of the curve? When referring to people asking for benefits for the first time, that may be the case. However, state registers are swamped with requests, meaning not everybody can get through and fill an online form. 

President Donald Trump said that the US reached the peak of coronavirus. While his statement may cast doubts, have initial claims also peaked out and beginning to fall? 

Even if everybody got through and the peak is behind us, the past four weeks have seen a total of over 21 million claims. That last number means that the economy wiped out all the positions created since the Great Financial Crisis.

Moreover, Continuing Claims have reached 11.976 million. These are people that are not applying for the first time but continue asking for benefits. Also here, the numbers may be understated due to glitches or as some have given up altogether. 

Permanent damage

The rapid loss of jobs cannot be repaired in one day. Even if Trump forces governors a full return to normal tomorrow – something that will not happen – a true comeback depends on the people. Even if the gym, cinema, and restaurant open their doors, many will shy away from public places. Business owners are also likely to hesitate before returning to activity. 

The depth and breadth of the damage to employment are partly the blame of Washington, which increased unemployment benefits instead of seriously incentivizing firms to keep employees on the payroll. Several European countries enacted furlough schemes where governments pay workers most of their salaries while they are on vacation.

When the economy reopens, some companies may rehire past workers. However, the detachment between the employee and the business is more likely to turn permanent than temporary. 

The depressing jobless claims figures join devastating retail sales figures and mean a deeper recession. The main beneficiary is the US dollar – the safe-haven of choice. While other countries may experience a more moderate decrease in employment, they also depend on the power of the US consumer. Fewer jobs mean lower consumption, and collateral damage to the rest of the world.