Furlough extensions, benefit failures

Posted by: Paul Donovan

26 Aug 2020

Daily update

  • We have speakers from the ECB and the Federal Reserve; Bank of England Chief Economist Haldane is also speaking (the views of chief economists should always be treated with reverence). Markets are not likely to care, however. The idea of low rates for a long time is so deeply embedded into market expectations it would take dynamite to shift that perception.
  • French consumer confidence is due – and this comes fully weighed down with the problems of survey based data. France is an interesting outlier in that a huge share of its workforce was furloughed in lockdown, compared to other economies.
  • The German government announced the Kurzarbeit furlough scheme will be extended to end-2021 (it normally lasts 12 months). Governments now have to strike a difficult balance. In the long term, it is economically efficient to preserve jobs in companies with a future. It is economically inefficient to preserve jobs in companies that are unlikely to survive the structural changes of the fourth industrial revolution.
  • US President Trump's executive orders to increase unemployment benefit appear to have had very little effect – Texas and Arizona are paying USD 300 (not USD 400) per week more, but no other state is. This emphasizes the need for a fiscal deal. Durable goods orders data is due.

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