OPEC held talks as Unemployment grew in US, Canada
Thursday’s unemployment figures showed that further 6.6 million people were unemployed in the US. The numbers were released as part of the weekly US jobless claims which in the last 2 weeks has seen the number of people out of work due to Coronavirus reach over 9 million people. These numbers are the worst in the history of the US, and the numbers look set to grow as no firm end to this crisis has still yet to be established.
With yesterday’s number now out, this means in the last 3 weeks alone a total of 16.8 million people are now claiming jobless benefits within the world’s largest economy. A title which may be lost to China soon, should this continue. This comes as the US unemployment rate climbed for the first time since 2008, the rate of unemployment had been 3.5%, but quickly jumped to 4.4% when last week’s Non-farm Payroll numbers were released.
Many believe that the trend of joblessness in the US will continue to grow throughout the month of April. If this trend continues, we estimate that when the NFP data is released in May, we could see as many as 20 million people unemployed. If these estimates are accurate the unemployment rate will be closer to 10% which will be another record. Some estimates say that the unemployment rate could be now as high as 13%, which would beat the 10% number seen at the peak of the last recession.
In Canada we have seen similarly bearish numbers. The unemployment rate jumped from 5.6% – 7.8% % as the net change in employment figures for March were released.
Moves in the Market
As the numbers came out, Gold markets rallied and climbed as much as $10, in no less than 20 minutes as the flight to safety began. With prices reaching the recent ceiling of $1673 as seen in the below 1 hour chart on Gold. However with this being a price resistance, many fear there could be some interim uncertainty, before prices further react.
In addition to the jobless number the Federal Reserve announced that they will essentially be backstopping the US economy. As stated by FED chairman Jerome Powell “we will provide as much relief and stability as we can”. This sentiment seems to be the same across all central banks and most governments across the world. With this crisis not being industry specific like what we saw in 2008. These actions show that the “too big to fail” label has now transcended financial markets.
OPEC+ also met on Thursday with the prospect of discussing possible production cuts. Going into the meeting it was touted that Russia would be open to cutting as much as 2 million barrels a day in supply, however the tensions with Saudi was one of the main potential blockers of a deal. Should a deal be agreed then it is likely that Oil prices would slowly but gradually climb back towards the $30 mark. However any further tensions within the cartel could lead to markets falling back to the low teens.