Labor gains offset fiscal pains

Posted by: Paul Donovan

18 Sep 2020

Daily update

  • US initial jobless claims fell again last week. The labor market in the US (and elsewhere) has been improving faster than traditional models predict—such models are not designed to deal with a policy-led downturn and recovery. The improvement is welcome because it helps to offset the failure to extend fiscal support in the form of higher unemployment benefit.
  • There is US consumer sentiment data from the Michigan survey, which can be ignored. Generally, fear of the virus seems to have faded in the US, and the astonishing increase in small business creation suggests at least some level of general confidence. The second quarter US current account is expected to show the largest deficit since 2008. Trade taxes have done little to stop the US from importing.
  • UK August retail sales showed British consumers are willing to go out and spend the savings they accumulated during lockdown. The pattern is consistent with what is being seen elsewhere—consumers are more willing to spend than expected, and previous month's data is being revised stronger.
  • German producer price inflation was uninteresting. Italian industrial orders and sales numbers for July are due. Sentiment data suggests a modest gain, but in June the PMI sentiment indicator predicted weakness, and orders rose over 23%.

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