US jobs
Workers at a US factory. The devastation of the coronavirus pandemic on the US labor market will be on display this week, with Friday’s jobs report likely to show the unemployment rate soared to nearly 20%. Image Credit: Bloomberg

Washington: The devastation of the coronavirus pandemic on the US labor market will be on display this week, with Friday’s jobs report likely to show the unemployment rate soared to nearly 20% and employers cut millions more from their payrolls in May.

The Labor Department’s data may mark the worst of the fallout from the disease as states have started to lift the shutdown orders that brought demand and the economy to a standstill. The median forecast in a Bloomberg survey calls for the jobless rate to rise to 19.6%, the highest since the Great Depression era of the 1930s. Payrolls probably declined by almost 8 million after a whopping 20.5 million slump in April.

What economists say

“Bloomberg Economics expects unemployment to peak near 20% in the second quarter and to then fall toward 10% by year-end. To be sure, this reflects an impressive rebound in the economy, but a clearly incomplete one, which leaves behind a significant share of the newly jobless.”

Unemployment data across Europe are set to paint a similarly dismal picture, yet another reason for the European Central Bank - which meets Thursday - to boost its stimulus measures. Rate decisions are also due in Australia and Canada.

Asia

PMIs for May will be closely watched to assess the pace of the region’s recovery. Australia’s central bank board will meet Tuesday, with no changes expected to its target for three-year bond yields or the cash rate - both set at 0.25%. The following day, Australia’s first quarter GDP growth data will be released. Economists are currently expecting only a moderate contraction in the period as a pre-lockdown retail splurge offsets the impact of restrictions that came into effect at the end of the quarter.

Europe, Middle East and Africa

Anything less than an expansion of the ECB’s emergency asset purchasing program will be a big shock to economists and investors, who widely anticipate a 500 billion-euro ($555 billion) top-up by the Governing Council. Policy makers will also release their latest economic projections, possibly confirming President Christine Lagarde’s remarks that the euro area is mired in a much-worse slump than initially hoped.

On the data front, PMI survey readings could give investors a clue whether Italy and Spain, seen as the euro area’s most vulnerable economies, are slowly starting to turn the page on the worst chapter of the crisis. In the U.K., house prices in May and mortgage approvals a month earlier could offer the first meaningful reading on the market after the lockdown brought viewings and sales to a halt.

Elsewhere in Europe, Romania’s prime minister is expected to announce a new round of stimulus based on public investment and support for the private sector.

Data on Friday will show the South Africa Reserve Bank continued purchasing government bonds in May after more than doubling its holdings in April to reduce dysfunctionality in the market.

US and Canada

The Federal Reserve is in blackout this week before its next regularly scheduled FOMC meeting later this month. Meanwhile, in the runup to Friday’s jobs report, investors will digest more economic data showing the impact of the coronavirus. Reports include factory orders, trade numbers and the latest week of jobless claims.

Latin America

On Monday morning, Chile’s Imacec economic indicator, a proxy for output, may post a double-digit decline in April from a year earlier with the country shuttered by the outbreak and containment measures. That afternoon in Colombia, the minutes from Friday’s central bank meeting should give a much better idea of where the current easing cycle is headed now that the key rate is at a record low.

On Wednesday, data in Brazil is likely to show that industrial output in April fell the most since at least 2003, when the national statistics agency introduced the current series. Reports on Friday from Chile and Colombia should show that inflation in both countries is slowing and well within their respective target ranges.