Global Macro & Strategy

Macro in a Minute: the most important metric so far

As the data has been coming through in the past month where the first full effects of the COVID-19 disruptions to business and livelihoods have been appearing, it has been an incredible sea of red.

Most data points have been setting records for the sheer magnitude of the negative effects, and possibly the most important one of all has just come through with an eye-watering number.

In what was a record number in any way you want to slice it, either from a level or rate-of-change perspective, the latest Initial Jobless Claims in the US has to be seen to be believed. Even then, its hard to believe.

In fact, to put this into proper perspective, we need two graphs.

Here is what it looked like before over the past 20 years.

The new number of Jobless claims number is so big it completely changes the scale of the graph. Here is the new one.

Its almost impossible to contextualise just how epically bad this number is.

The bottom line:

When Jobless claims do this, there is only one outcome – recession. And the magnitude of the spike indicates it will be deep based on any type of historical context. Anyone thinking this is a short lived, V shaped bottom due to central bank money printing and Government fiscal spending is not living in the reality of the magnitude of what these data points are showing, given that those measure will not fully offset the drop in output. The multiplier effect of this into an economy reliant on consumption is immense and will not be evident today, but it will come through in the data in the months to come. As always, being data dependant will serve us well in the months ahead.


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