Key events in developed markets next week

The economic pain from Covid-19 containment measures can be summed up in one statistic – more than 30 million Americans have filed for unemployment benefits in the past six weeks.

The official April jobs report is published on Friday 8 May, but we have to remember the data is collected in the week of the 12th so the past two weeks of initial claims data will correspond with the May jobs report, published early June, not next week’s. If we assume unemployment has risen by 21 million in April, that would push the unemployment rate to around 16%. An additional 12 million unemployed in May and we are looking at an unemployment rate of around 22%.

Thankfully, this is below the 24.9% peak experienced in 1933, but we have to remember that one third of Americans aged 18-65 are not classified as employed or unemployed – they are students, early retirement, homemakers, carers or sick. This leads us to yet another sobering statistic – that less than half of working age Americans will be earning a wage next month. In an election year, this means that the call for politicians to re-open the economy is only going to get louder, irrespective of the health advice.

Canada will also release its jobs report and we look for a further 2.5 million people to have lost their jobs after unemployment rose by 1 million last month. Canada’s heavy exposure to international trade and commodities, particularly oil, make it very vulnerable in this economic downturn.

Like the Federal Reserve and European Central Bank, we’d expect the Bank of England to use its meeting next week to take stock – we aren’t expecting anything new. Like other central banks, the BoE has been adept at acting between meetings, and with rates close to zero, and a vast QE package in place, policymakers are ‘all in’ for the time being. Instead, focus will be on the Bank’s new forecasts which, like other central banks, will likely take the form of scenarios. At ING, our base case assumes a 10-15% peak-to-trough fall in GDP (although clearly there’s scope for a lower figure), but more importantly, we don’t expect the economy to reach its pre-virus size until at least 2022. With that in mind, there’s certainly scope for some of the BoE’s purchasing programmes to be expanded later in the year if needed.