Preview: Initial jobless claims set to shatter records
All eyes on Thursday's report
Thursday's US weekly initial jobless claims report is without is without a doubt the most-anticipated report ever.
The estimates vary wildly from 400K at Helaba to 4000K at Citigroup. The consensus is +1500K but there is very little to go on. Mass layoffs because of a mandated shutdown in a pandemic aren't part of the model. I warned about this 12 days ago and people then called me crazy.
One hint is from Ohio, which reported daily claims until the White House asked them to stop this week. From Sunday-Thurs officials there reported 140K claims compared to 5K in the same period a week earlier. If you extrapolate from that, we're looking at a number we're looking at a number 50% above the top of the forecast range.
The California governor said 1 million people in the state have filed for unemployment claims this month.
If you look north, it's even worse. Canada reported that employment insurance claims hit 1 million last week compared to 27K in a normal week. Canada has shutdown more quickly and more thoroughly than most of the US so it's not an entirely fair comparison, but it would imply around 9 million US claims.
The previous record -- adjusted for population was 695K.
The point is, the range of possibilities is remarkable.
How it's calculated is also critical. The numbers are counted by individual states ending on Saturday and then sent to the Labor Dept and released each Thursday. There is also some massaging of the data and estimating.
At this point, I think a great deal of bad news is priced in. I don't think a number up to 3m would even be a big surprise. It might hurt retail sentiment and will certainly grab headlines but the market knows that layoffs have occurred and will continue. Something over 5m would be a shock to the market.
On the flipside, a strong number could also be quickly discounted. Anything less than 1m would be 'good' but there's no fooling the market. People are losing there jobs so it's just a matter of time until it shows up in the numbers.
What it is is a benchmark. There are would-be buyers of risk assets right now who don't want to be long into it. There may also be people who have sold ahead of the number or are planning to sell on it.
Whichever way it goes afterward probably sets the tone for the day. Beyond that market participants will start looking to the weekend and deciding the amount of risk they want to take into the weekend.