Fading fiscal hopes

Posted by: Paul Donovan

08 Oct 2020

Daily update

  • Hopes for a US pre-election fiscal stimulus are quietly fading to nothing. There might be something for the airlines, but no big package looks likely given the language (and amount of time available). The personal damage is worst for those who are unemployed. The economic damage is worst if people with jobs keep hold of savings as an insurance policy.
  • The US labor market is approaching a shift. Firms with a future rushed to get back to business as normal, which led to an initial surge in employment. That looks to be fading, inevitably. Firms that were in decline are now in a precipitous descent to oblivion, and this will create structural unemployment. Data like today's US jobless claims gives some signals of this process.
  • ECB and US Federal Reserve speakers crowd the agenda again, but are unlikely to say anything interesting. The interminably tedious EU-UK divorce continues, and is guaranteed to say nothing interesting. Remember, for all the talk of deadlines, Brexit never actually ends. It is not called interminably tedious for nothing.
  • German trade data for August was in line with the global trends, with better imports and exports. The bounce-back was focused on demand for goods, supporting trade.

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