Markets rally as US unemployment rate falls to 11.1% - as it happened

Graeme Wearden

from on 2020-07-02 15:50 (#5598Y)

Rolling coverage of the latest economic and financial news, as the latest non-farm payroll beats forecasts

Latest: 4.8m jobs restored in June
What the experts say:
But initial jobless claims still over 1.4m
Coronavirus - latest updates
See all our coronavirus coverage

4.48pm BST

Finally, the London stock market has posted its highest closing level in a week, lifted by the US jobs report.

The FTSE 100 closed 82 points higher at 6240, a gain of 1.3%

Stocks were pushing higher this morning on the back of the news that Pfizer and BioNTech saw positive results from their drug trial that they are hoping will be a vaccine for Covid-19. The news encouraged traders to buy into the market, but the results have yet to be reviewed by a medical journal.

In June, the US added a record 4.8 million jobs, which smashed the 3 million consensus estimate. The May reading of 2.5 million was revised up to 2.69 million. The unemployment rate fell from 13.3% to 11.1%, while the consensus estimate was 12.3% Yearly average earnings dropped from 6.6% to 5% - this is probably because a large number of lower income workers re-entered the work force. The labour participation rate increased to 61.5% from 60.5%. The US labour market still has a long way to go but it is clearly heading in the right direction. The jobs data spurred on the buying of stocks as the recovery is on traders' minds.

It it remains too difficult to call this trend with any real confidence as we continue to see-saw between lockdown tightening and lockdown loosening. Instead, it's the revision to these numbers in the next set of data that will prove most revealing. The path to normalisation will be volatile until a vaccine is found, and in the meantime, investors will have to become accustomed to a tentative strategy of two steps forwards, one step back.'"

4.27pm BST

Here's our news story on Primark's lost sales during the pandemic:

4.22pm BST

A former top UK civil servant has called for the government to consider a wealth tax, as part of its strategy for addressing the debt mountain built up under the pandemic.

Our economics correspondent Richard Partington has the details:

The UK government's response to the coronavirus and the dramatic rise in public borrowing during the crisis should include a wealth tax on the richest in society, a former head of the civil service has said.

Sir Gus O'Donnell, who served as cabinet secretary under David Cameron, Gordon Brown and Tony Blair, said the Conservative government could prove it was serious about fighting inequality and levelling-up Britain by increasing taxes on wealth.

3.57pm BST

Donald Trump's economic adviser has told Bloomberg TV that any future stimulus programme probably won't include more generous unemployment benefits.

Currently, Americans out of work get a $600-per-month payment, on top of the basic help, under the $2.2 trillion CARES Act. But, that provision ends at the end of July - and Larry Kudlow suggests that it won't be extended.

The shape of any kind of package is still up in the air,"

Re-employment benefits probably will help fill the bill.

You'd make more money if you don't go to work.

3.37pm BST

Notably, the disparity between earnings for US black workers and their white colleagues has widened since the pandemic started.

The White unemployment rate fell by 2.3 percentage points in June to 10.1% from 12.4%, while the rate for Black Americans dropped by 1.4 points to 15.4% from 16.8%.

NEW: The Black unemployment rate fell, but it decreased for White workers by more, widening the disparity further https://t.co/ZTXAnPRZ27 pic.twitter.com/Z3Jn8q2x3o

3.14pm BST

Here's a video clip of Donald Trump predicting a fantastic third quarter" to the year.

He also insists that the economy can reopen as long as Americans follow sensible practices such as hand-washing (no mention of masks, alas).

President Trump predicts a third quarter the likes of which nobody has ever seen before," and a historic" 2021. https://t.co/O1HyUK5Q0F pic.twitter.com/9oYLH56bWH

2.54pm BST

President Donald Trump just held a brief press conference, saying the US economy is roaring back' with its biggest jump in new jobs ever.

Trump hailed June's jobs report as a sign that his administration is doing a grand job (despite the deeply worrying spike in Covid-19 cases).

President Trump on the economic comeback: 'The only thing that can kill it is a bad president who wants to raise taxes...your stock market will go down to nothing...this is not luck, it is talent'

These are historic numbers at a time when a lot of people would have wilted. We didn't wilt, and our country didn't wilt, and I'm very honoured to be your president.

Trump: "It's all coming back. It's coming back faster, bigger and better than we ever thought possible. These are the numbers. These are not numbers made up by me. These are numbers."

2.35pm BST

Boom! The New York stock exchange has opened higher, as investors welcome the jump in US employment last month.

Stocks are rallying, as Wall Street ignore the jump in Covid-19 cases that is forcing some Independence Day celebrations to be cancelled.

BREAKING: Nasdaq Composite hits new all-time high https://t.co/pqji9PpXfP pic.twitter.com/kBL75hdEBy

The fall in the unemployment rate in the US to 11.1% reflects overall an improving, albeit slow, trend in the economy as lockdown continues to gradually lift.

However, with a jobless rate still over 10%, the US labour market faces a long road ahead to unravel the colossal damage wrought by the pandemic. Furthermore, these figures may be somewhat deceiving - in some states recovery has stalled because spikes in the virus have surfaced again causing a fresh wave of shutdowns and keeping layoffs elevated.

2.31pm BST

Here's a reminder of the jobs devastation caused by Covid-19:

2.17pm BST

Jed Kolko of jobs site Indeed.com has spotted that underlying unemployment in the US has risen. That's a sign of the permanent damage being caused by the virus (more details here).

Core unemployment jumped in June to 5.9% from 5.0% in May. It's rising at an accelerating rate.

Core unemployment removes temporary layoffs and adds the marginally attached. pic.twitter.com/9JJy00qkgr

While the headline rate fell in June thanks to fewer temporary layoffs, the core unemployment rate is climbing.

That's the chronic pain that will follow this acute crisis. pic.twitter.com/j4J7B5IPxG

2.12pm BST

Economists and investors agree that June's US unemployment report is better than expected, showing that businesses returned to work as the Covid-19 lockdown was eased.

But they also warn that the worrying spikes in coronavirus cases since firms reopened could derail the recover. Here's some reaction:

Today's upbeat U.S. jobs report will build upon the market's positive momentum from last month's data. However, even if the number is trending lower, continued jobless claims over the past few weeks suggest that many job losses may become permanent as businesses struggle to reopen and unused resources and skills become outdated. It's also possible that a labour market recovery may be further endangered by the latest spike in infection rates in various states.

A second wave of deaths could in turn lead to a second wave of decline for the economy, corporate earnings and the stock market.

US unemployment remains at historic high levels. But the data does appear to be improving, driven by the gradual reopening of the economy. However, the consequences of throwing open the shutters so eagerly are already being seen, with multiple states now battling a second wave of infections. As they beat a retreat to a more economically and socially restrictive framework, the reality of the situation is starting to bite even the most gung-ho of state Governors.

Today's jobs report shows progress is being made, but American workers need a rescue plan. Otherwise, these gains can easily evaporate. Prolonged double-digit unemployment will leave scars on the US labor force that could take decades to heal. Congress can help by immediately eliminating the uncertainty millions of families are facing from the looming fiscal cliff at the end of this month.

But an extension of the unemployment supplement and more aid to states won't be enough. Without long-term thinking, the US will suffer rolling waves of recovery and recession.

2.09pm BST

Before the pandemic struck, America had never seen a million jobless claims in a single week.

It has now seen at least 1.4 million new claims each week since mid-March!

Although initial jobless claims have fallen in succession for 13 weeks, their declines over the last week average only 46k (3%) per week. Given the rash of new COVID-19 cases, we must now consider the possibility that initial jobless claims will begin rising again. pic.twitter.com/8KVcrpCuJB

for the 15th straight week, at least 1.4 million Americans filed initial jobless claims.

the all-time high before March was 695,000.

2.03pm BST

Here's my colleague Dominic Rushe on today's jobs report:

US employers took back another 4.8 million workers last month as the coronavirus pandemic's economic impact appeared to wane, marking the second consecutive month of jobs growth. But the latest figures are from before new surges in infections that threaten the fragile recovery.

The US Department of Labor announced on Thursday that the unemployment rate dropped to 11.1% in June from an initial estimate of 13.3% in May. The figure is still more than three times higher than the 3.5% unemployment rate in February before the US outbreak.

1.51pm BST

Stock markets are pushing higher, as investors welcome the better-than-expected US jobs report.

In London the FTSE 100 is 75 points higher at 6232, a gain of 1.2%.

A notably stronger monthly #jobs report relative to consensus expectations; slightly weaker weekly jobless claims:
An increase to 4.8 mm in June in jobs created;
The unemployment rate fell to 11.1%;
Jobless claims rose (1.43 mm) as did continuing claims (19.2 mm)#economy https://t.co/DRDJtbL4Pw

1.48pm BST

Although June's Non-Farm Payroll is encouraging, the latest count of jobless claims is less upbeat.

Around 1.4 million Americans filed new initial claims for unemployment benefit last week. That's more than expected, and shows that some firms may have been laying off staff again following the surge in coronavirus cases in several states.

US / Continued Jobless Claims

Pente a gauche vs pente a droite... pic.twitter.com/pmqiJrwziY

1.42pm BST

Here's some snap reaction to the news that America's jobless rate dropped sharply last month:

4.800M jobs were gained in June; better than the consensus of +3.230M. The Unemployment Rate was 11.1%, better than the 12.5% estimate and down from 13.3% in May. The Labor Force Participation Rate was 61.5%, up from 60.8% in May.https://t.co/wyfH3UcCAS pic.twitter.com/LnCEkLBUR0

Nonfarm Payrolls (Jun) much better than expected +4.8M vs +3.23MUnemployment Rate: 11.1% exp. 12.3% and Innitial Jobless Claims: 1.4M vs 1.3M expected market is #Trade @GT_247 and #Invest stocks @EasyEquities

JUST IN -- US economy adds 4.8 million jobs in June. Jobless rate falls to 11.1%. Some progress -- but a lot of folks still hurting. And recovery threatened by #COVID19 resurgence.

1.40pm BST

The 4.8 million extra jobs created in June is the biggest one-month improvement ever in US employment.

However, after 20 million jobs were lost in April, there is a long way to go.

The U.S. economy created jobs at a record clip in June as more restaurants and bars resumed operations, further evidence that the COVID-19 recession was probably over, though a surge in cases of the coronavirus threatens the fledgling recovery.

Nonfarm payrolls increased by 4.8 million jobs in June, the Labor Department's closely watched monthly employment showed on Thursday. That was the most since the government started keeping records in 1939.

1.32pm BST

NEWFLASH: America's economy created 4.8 million jobs in June, the latest Non-Farm Payroll shows.

This drags the US jobless rate down to 11.1%, down from 13.3%. Still worrying high, but a sign that America's economy has been healing last month, at least before the spike in Covid-19 cases in recent days.

12.36pm BST

Today's US jobs report will be eagerly awaited by investors, including the new army of day traders who have embraced stock trading since the pandemic began.

The market crash of February and March, and the strong rally in April and May, has encouraged many more people to try share trading. It's been an exciting time to be a day trader, especially if you backed winners such as tech stocks - or bought travel companies at their March lows.

Alex Kearns was an ordinary 20-year-old. He played the trombone, studied at the University of Nebraska and, like millions of other Americans, traded stocks to pass the time or make some money when coronavirus shut down schools and workplaces. Unfortunately, his youthful dabbling ended in tragedy.

On June 12 back at home in Naperville, Illinois, Kearns took his own life, after believing he had lost nearly $750,000 in a soured options bet made on Robinhood, an online brokerage that has become emblematic of a new era in retail investing. In a note left for his family, Kearns said he had no clue about what I was doing" and never intended to take this much risk".

Basically, I'm 100% with @BillBrewsterSCG here. Frictionless trading - under the guise of frictionless INVESTING - is actually a bad thing, and the consequences could be severe. pic.twitter.com/FW80ZpnGDc

12.01pm BST

European stock markets are pushing higher, driven by gains in Frankfurt and Milan.

Britain's FTSE 100 is up 59 points, or 1%, while Germany's DAX has powered ahead with a 1.7% gain - to its highest level in over a week. Italy's FTSE MIB is 2% higher.

UK-focused airlines are enjoying a surge nearly trade today, as the government air bridge plans expanded beyond expectations to include a potential 75 nation whole visitors would avoid the 14-day quarantine.

News of very strong" booking numbers for Ryanair highlights the demand that has been locked down up until now.

10.54am BST

Eurozone unemployment is likely to keep rising, even if economies succeed in reopening, warns Bert Colijn of ING:

He writes:

As the economy goes through a historically steep and deep recession, the increase in unemployment in May from 7.3 to 7.4% can be considered a great success. Don't cheer too early though, we think eurozone unemployment is set to rise for a while to come....

In the months ahead, the surprisingly stable eurozone unemployment rate is likely to continue to creep up. This is simply because the economy is unlikely to reach the level of pre-crisis output anytime soon, leading to inevitable job losses especially when short-time work schemes draw to a close.

#Eurozone unemployment rate inched higher to 7.4 % in May from 7.3% in April amid govt support. Youth unemployment grew much faster, meanwhile: Eurostat estimated that 16% of youths were out of work in the euro area, up by 0.3ppts. pic.twitter.com/Ij7rGuktIt

10.46am BST

Unemployment jumped in Italy in May, but fell sharply in France, today's data show.

Eurostat reports that the Italian jobless rate jumped to 7.8%, from 6.6% in April, as people started looking for work again after the Covid-19 lockdown.

The government's lockdown measures aimed at containing infections brought the economy to its knees, with most firms shuttered throughout March and April.

The jobless rate plummeted in those two months as people stopped looking for work. The rise in May reflects the gradual end of the lockdown and Italians returning to the labour market.

10.26am BST

Younger workers have also been hit hard by the jump in unemployment in Europe.

The youth unemployment rate rose to 16% in the eurozone in May, up from 15.7% in April.

In May 2020, 2.815 million young persons (under 25) were unemployed in the EU, of whom 2.267 million were in the euro area. ...

Compared with April 2020, youth unemployment increased by 64 000 in the EU and by 42 000 in the euro area.

10.23am BST

Unemployment across the eurozone has risen, with women bearing the brunt of Covid-19's impact on the economy.

The eurozone's jobless rate rose to 7.4% in May, up from 7.3% in April. In the wider EU, it rose from 6.6% to 6.7%, as the coronavirus lockdown hit demand and forced many shops, offices and factories to close.

In May 2020, the unemployment rate for women was 7.2% in the EU, up from 6.9% in April 2020. The unemployment rate for men was 6.4% in May 2020, stable compared with April 2020.

In the euro area, the unemployment rate for women increased from 7.7% in April 2020 to 7.9% in May 2020 while it remained stable at 7.0% for men.

Euro area #unemployment up to 7.4% in May 2020 (7.3% in April). EU up to 6.7% https://t.co/X9JmpqjrFR pic.twitter.com/RHDwUW8hRs

10.07am BST

Bad news: UK business leaders are more pessimistic about the impact of the Covid-19 pandemic on jobs.

The Bank of England's latest survey of chief financial officers from small, medium-sized and large companies found that they expect a bigger hit to employment than a month ago.

In the June DMP survey, businesses expected their sales in 2020 Q2 to be 38% lower than they would otherwise have been because of Covid-19, employment to be 8% lower and investment to be 38% lower.

Sales were expected to recover only gradually over the next year with the negative impact from Covid-19 lessening from 38% in 2020 Q2 to 26% in Q3, 16% in Q4 and 10% in 2021 Q1. Investment was expected to recover somewhat more slowly than sales, but was still on an upward trajectory. In contrast, the impact on employment in Q2 was expected to be more persistent than the impact on sales, with the hit to jobs rising a little in Q3 and Q4, when it peaks at 11%, and falling back only a touch in 2021 Q1.

9.54am BST

As usual, there are a wide range of forecasts for how many jobs were created in the US last month:

#NFPguesses

What's yours? pic.twitter.com/Ix3gTwIshi

9.11am BST

Hopes of a Covid-19 vaccine breakthrough are lifting travel stocks in London today.

Jet engine maker Rolls-Royce has risen by 6%, with British Airways owner IAG gaining 5.5%. Budget airline easyJet is up almost 6% too.

Investors largely are shrugging off higher cases though as Pfizer reported positive results from a vaccine trial. But we have been here before - it's too early to get too excited - but a working vaccine is the holy grail as it would allow real normality to return to the economy.

8.34am BST

Shares in Britain's Associated British Foods have surged by 7% this morning after it reported encouraging sales at its Primark division.

Sales in the week ended 20 June, with over 90% of our selling space reopened, were 133m and trading in England and Ireland were ahead of the same week last year.

8.10am BST

European stock markets have opened higher too, with the FTSE 100 gaining 50 points (0.7%). Germany's DAX has risen 1%.

8.03am BST

Stock markets across Asia-Pacific have rallied today as investors anticipate a strong US jobs report later today.

Shares jumped in China, Australia and South Korea, lifting markets in the region towards four-month highs.

Our first vaccine candidate is eliciting antibody levels to neutralize the virus that is equivalent to or better than what you see in people who have had COVID-19."

It's been a tremendous amount of work and there's now a lot of pride to see the results start to come forward.

Global stocks rise w/China mkts outperform on promising Covid vaccine news from BioNTech, that maintained hope of having vaccine by Dec & dashed worries regarding mounting new US infections. US Fut higher ahead of jobs report. Bonds steady w/US 10y 0.67%. Gold 1767, Bitcoin 9.2k. pic.twitter.com/hONpMKc16D

7.46am BST

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

I do not think we can overemphasize the importance of Thursday's NFP bridging the disconnect between improving cyclical data (i.e., PMIs) and a lackluster medium-to-long-term economic prognosis as persistently negative yields would lead one to believe.

A better-than-expected outcome could go some way to settling the near-term debate that the US labor market will heal relatively quickly and justify new highs in US equities.

The bottom line is the spread of this virus continues at a rate that is particularly concerning,"

Will be hard to conclude anything definitive from tomorrow's #jobs report::
Many competing influences make it difficult to distill insights on durable labor market trends;
Data already out-dated given economic re-opening reversals and layoff intentions trending up to larger firms

The closures in Southern California are now accelerating. Started with businesses (below). Faced with the closure of the State beaches, and having cancelled the fireworks,a growing number of cities here are now shutting their beaches for part or the whole of the July 4th weekend pic.twitter.com/JehRE5l3gB

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