Hi-Yo Silver lining

Posted by: Paul Donovan

03 Jul 2020

Daily update

  • The US released its employment report before heading off on holiday. The data is dodgy (unemployment is certainly higher than reported), but while it lacks precision the numbers are clearly improving. This situation is not like a normal economic cycle, and the growth in jobs should be very rapid for a few months. However, unemployment will still be high at the end of the year, as there will be business failures and permanent job losses.
  • Texas has announced face masks must be worn in public. US President Trump has endorsed mask-wearing – he looks like the (Texan) Lone Ranger in a mask, apparently. The economic question is whether localized lockdowns create national fear, and whether fear is as significant as it was earlier this year. The evidence from Europe is that this is not the case.
  • The German Bundestag has ruled that the ECB's bond buying is proportionate and that the Bundesbank can therefore carry on being part of the program. This follows the ruling of the German constitutional court, when lawyers played at being economists and tried to adjudicate on the legality of basic central bank policy.
  • There is an onslaught of opinion poll data that allegedly captures business sentiment. These numbers can be disregarded.

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