Ostrum AM | The United States, and the New York area in particular, is now the epicenter of the world Covid-19 pandemic. On economic grounds, the unheard-of spike in initial jobless claims gives a sense of the magnitude of output losses. A total of 6.6mn Americans lost their jobs last week. This raises the total of unemployed persons to 10mn since mid-March. The outlook for the next few weeks is dismal. The unemployment rate will increase very rapidly to levels unseen since the 1930s great depression. March non-farm payroll data reported only 701k job losses but the survey is conducted on the week on the 12th day of the reference month hence before the catastrophic claims numbers. April data will thus take account of job losses in the millions. California and the New York area, the richest and most dynamic economic regions in the country, have been placed under confinement measures. There is no doubt that 2Q20 GDP will collapse. New car sales have already fallen by a third to 12mn at annual rate in March. Sales may fall well below the 2009 low of about 9mn. Real estate will follow, which will put mortgage servicing firms in a very dire situation. The US Treasury worries about chain bankruptcies in the residential mortgage financing industry. The bailout of small servicing firms may fetch $75b and up. Against this backdrop, ISM survey readings are dubious. As NFP employment data, ISM manufacturing only reported a modest contraction (49.1) whilst the March service gauge indicated expansion (52).
In Europe, available surveys do point to a plunge in service activity. Italy (17.4 in March) is most affected and Spain also faces a major setback. Manufacturing fares slightly better. Partial unemployment schemes and government guarantees are used extensively. All sectors cannot be bailed out. In China, surveys suggest a recovery is starting to unfold but a number of Asian countries worry about a resurgence of the epidemic.
