Gold has shaken off losses in today’s session following a major increase in jobless claims. Claims rose 70,000 in the week ended March 14 to 281,000, the highest level since 2017. The last time claims were this high was a result of Hurricane Harvey which damaged infrastructure and resulted in widespread disruption of business activity. The coronavirus pandemic is behind the sudden surge in claims, which was forecast at just 220,000.
- Jobless claims rose 70,000 to 281,000 vs. 220,000 expected due to increased disruption from the coronavirus outbreak.
- The less-volatile four-week average rose 16,500 to 232,250.
- Continuing claims rose by a mere 2,000, highlighting the impact the virus outbreak has had on sudden job loss.
The coronavirus outbreak is poised to have a major impact on the US labor market, a crucial part of the economy. While labor is always a vital component, the labor market has been particularly resilient in recent years, supporting strong consumer spending even through the extended trade war between the US and China, a floundering housing market, and the effects of a global economic slowdown. Consumer spending, which accounts for two-thirds of US economic activity, relies heavily on a robust labor market.
However, while layoffs remained low throughout the past two years despite strong headwinds, the coronavirus has already resulted in tens of thousands of layoffs, and the situation is likely to drastically worsen over the coming months. Economists now believe that over 1 million Americans will lose their jobs by the end of this month, while the US Travel Association projects that 4.6 million jobs will be lost this year in the travel industry alone. Layoffs of this scale would raise the unemployment rate to 6.3%.
Rise in jobless claims is just the beginning. Unemploy rate likely to be 6%+ by end of year and then higher — if we don’t act pic.twitter.com/EalAEzfVLu
— Steven Rattner (@SteveRattner) March 19, 2020
“During the week ending March 14, the increase in initial claims are clearly attributable to impacts from the COVID-19 virus,” the Labor Department said. “A number of states specifically cited COVID-19 related layoffs, while many states reported increased layoffs in service-related industries broadly and in the accommodation and food services industries specifically, as well as in the transportation and warehousing industry, whether COVID-19 was identified directly or not.”
Gold prices saw some upward momentum following the release of the labor market news, but remain down on the day. Spot gold last traded at $1,485.33/oz, up 0.54% with a high of $1,500.49/oz and a low of $1,465.55/oz. Gold prices got off to a rocky start in today’s session, and struggled against resistance despite the downbeat economic news regarding mass layoffs and a 7-year low in the Philadelphia Fed manufacturing index, also a result of the coronavirus pandemic.