Covid-19 crisis pushes US jobless claims above 40m – business live

ING’s chief international economist James Knightly cautions that despite the relative drop in US jobless claims, further hiring will be constrained by social distancing restrictions.

Social distancing will limit the ability of many retail, restaurant and leisure firms to open properly and they may find it isn’t economically viable to do so with the constraints currently being placed on them – such as limiting customer numbers.

Other businesses in various sectors may find that demand doesn’t return as quickly as hoped and may need to adjust employment levels in the months ahead.

Knightly also claims the government’s own support efforts could also hinder hiring, as some businesses won’t pay prospective employees as much as they are getting through emergency unemployment benefits.

The national average weekly unemployment payment for recipients is nearly $1,000 and there are many industries in which this is substantially above what an employee could ordinarily receive in wages. In fact a paper from the University of Chicago estimates that 68% of benefit recipients are actually receiving a higher income as a result.

Many businesses will not be able to pay enough to compete with this, so while this additional payment is good news for individual incomes and cash flow, it may have the negative effect of hampering small businesses re-opening/recovery effort.

The Nasdaq has bucked the trend and fallen at the open.

Here’s how Wall Street opened the session:

• S&P 500 rises 0.33%
• Dow Jones rises 0.58%
• Nasdaq falls 0.14%

America cities and towns are dealing with some of the highest unemployment rates since the Great Depression.

Our team has put together a photo gallery capturing the reality on the ground:

US GDP for Q1 may have been revised down to -5%, but like most economies hit by the virus, the worst is yet to come.

S&P 500 futures have extended their gains after the release of the GDP and jobless figures.

• S&P 500 futures are up 0.14%
• Dow Jones futures are up 0.67%
• However, Nasdaq futures are down 0.99%

There seems to be a slight sense of relief that this is the lowest number of weekly claims since early March 14 when claims rose by 282,000.

While US jobless figures are incredibly high, the number of claims are starting to ease compared to a few weeks ago, as Bloomberg highlights on this handy chart:

More data out of the US, with first quarter GDP shown to have contracted by -5.0%.

That is worse than forecast, with economists predicting that the reading would remain unchanged from preliminary estimates of -4.8%.

Dataflash: Fresh data shows US jobless claims rose another 2.1 million in the week ending 23 May.

It means more than 40 million Americans have now filed for unemployment insurance after losing their jobs over the past 10 weeks during the coronavirus crisis.

ING economist Carsten Brzeski says German inflation is likely to fall further over the coming months:

The drop in prices for consumer goods witnessed in many regional states suggests that a lack of demand, as well as an attempt to get rid of the goods piled up during the lockdown, have put downward pressure on inflation.

Looking ahead, there could be a more structural problem for inflation statistics. If consumer behaviour were to change structurally after an end to the lockdown measures, at least for a while, the basket measuring consumer price inflation might have to be adjusted, or at least taken with a pinch of salt.

In short, with low oil prices and deflationary forces stemming from the economic damage of Covid-19, German headline inflation will, in our view, continue moving in one direction in the coming months: down.

Holger Zschaeitz, reporter for Germany’s Welt, points out that inflation is now at its lowest level in four years:

Dataflash: Preliminary CPI data out of Germany shows consumer prices rose 0.6% year-on-year, compared to 0.9% in April.

Adjusted figures, which make it comparable to other EU countries, shows inflation only rose 0.5% year on year, compared with 0.8% a month earlier.

On a month-on-month basis, EU-harmonised prices were unchanged between April and May.