Image source: Antonio Perez / Chicago Tribune
Earlier today, the US Department of Labor released its most recent findings concerning the observed change in the number of filed unemployment claims over the previous weeks.
According to the findings of the labour report, 1.480 million people claimed benefits versus 1.320 million projected. The excess of 160 thousand claims marks the second consecutive week of worse-than-expected results.
Even still, an examination of the monthly performance reveals that the overall numbers have been falling steadily since the wake of the coronavirus crisis in early-April.
US Unemployment Claims. Image source: TradingEconomics.com
The disturbing news is that for the last three weeks, the recorded data has not been showing any signs of further slowing down as the registered numbers fluctuate around 1.5 million.
These statistics underpin the deepening crisis in the US labour market, which is unlikely to follow its robust performance from last month. In May, the US unemployment rate even managed to fall by 1.4 per cent.
In other words, the pace of the US economic recovery appears to be stagnating for the time being in relation to the observed labour data. With no available evidence to substantiate the expectations for continually falling unemployment, the headline rate is likely to remain above 10 per cent in the third quarter.
This would mean that in regards to employment, the FED would have to deal with muted economic conditions that are even worse than the ones used in most baseline economic models, especially the ones used for the stress tests in the banking sector.
These encompass the same baseline scenarios against which the Board of the Federal Reserve makes projections for an eventual recovery. It follows that a likely stagnation in employment growth could slow down the path to eventual recovery quite markedly.
The data becomes even more troubling given the recent resurgence in newly confirmed COVID-19 cases in the US, which could spell problems for the still reeling financial markets in the longer-term.
Meanwhile, the euro continues to struggle against the recently strengthened dollar. The demand for the greenback was bolstered as fears of a potential second epidemic wave intensified over the last several days.
After the current downswing on the EURUSD is concluded, the price action is likely to head back north, and towards the 23.6 per cent Fibonacci retracement level at 1.12706.
The underlying fundamentals in support of the euro substantiate these anticipations.
EURUSD 4H Price Chart. Image source: Trendsharks ©, created with TradingView.com
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