What’s happening: The US Department of Labor is scheduled to disclose its latest numbers on initial jobless claims for the week of March 20 later today. This report has historically had a meaningful impact on Wall Street’s performance.
What happened: US markets have been turbulent, with growing concern around a coronavirus-induced economic slowdown. The Federal Reserve has announced various measures to ease the economic impact of the coronavirus, with US lawmakers agreeing to a $2 trillion stimulus package only yesterday. The Fed has also brought interest rates to near zero in a bid to lift investor sentiment, while also making an unprecedented announcement of an unlimited bond-buying initiative.
Why it matters: Initial jobless claims data measures the number of people filing for unemployment benefits for the first time during the past week. It is closely monitored by investors and traders, as it is among the few near-real-time reports provided by the government and is an important indicator of economic strength.
Details: Companies across the US have pulled down their shutters following the spread of coronavirus. The speed at which companies have shut shop could potentially deliver the biggest blow to the US labour market in history. The travel, leisure and hospitality sectors, which are the hardest hit by COVID-19, employ around 15.8 million people. Many of these companies are temporarily shut, while some non-managerial employees losing their jobs. The restaurant industry is also under threat and current estimates indicate a loss of 5 to 7 million jobs. What is more concerning is that the duration of this temporary shutdown is yet unknown.
The weekly release of the report can be a market moving event. The employment situation is extremely important for a macroeconomic analysis, so the financial markets track employment indicators, although this is a low impact indicator compared with the monthly BLS's "Employment Report". This report tracks how many new people have filed for unemployment benefits in the previous week. It is a good gauge of the U.S. job market. For instance, when more people file for unemployment benefits, fewer people have jobs, and vice versa. Investors can use this report to gather pertinent information about the economy, but it's a very volatile data, so the four-week average of jobless claims is monitored
The initial jobless claims figure has a significant impact on the financial markets, being among the first indicator to be announced. A higher-than-expected reading is generally negative for US stocks as well as the greenback.
In the week ending March 14, initial jobless claims had risen by 70,000 to 281,000. This was well above market expectations of 220,000. For the current report, the consensus estimate stands at a whopping 1,000,000.
What to watch: US stocks posted strong gains this week. Investors are now hoping for the initial jobless claims to come in lower than estimated, to keep the upward momentum going. On the other hand, US stock futures are trading in negative territory this morning, pointing towards a lower open on Wall Street.