Two labor markets, one country

Posted by: Paul Donovan

02 Oct 2020

Daily update

  • The US employment report will be closely watched. The US and other economies have experienced a faster improvement in employment than many economic models would have predicted. We have not had a normal economic cycle—the faster economic bounce-back meant many firms wanted workers back at work more quickly.
  • Several sectors of the economy were already in decline as a result of the fourth industrial revolution. That decline has become a more rapid descent, and structural job losses are increasing. US employment data has signalled this split—low- and high-skilled employment participation has risen, while mid-skilled employment participation has fallen.
  • News that US President Trump has tested positive for COVID-19 must be worrying at a personal level, as it would be for anyone. Markets (being impersonal) will focus on whether this affects the election outcome or public health policy. The future presidential debates may not happen; these were not seen as especially significant. Those opposed to mask-wearing may revise their views, and the president's experience may impact US public health policy.
  • Eurozone consumer price inflation is due—understated and unimportant. The ECB announced a consultation on a digital euro. This is not the same as a cryptocurrency although proper digital currencies may reduce any lingering demand for crypto.

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