Jobless Claims Double Again
This week’s jobless claims more than doubled last weeks’ record high, reaching 6.648 million. Last week’s figure of 3.28 million jobless claims was already 5 times larger than the previous record of 700,000. And now it has doubled this new figure again.
Economists have taken this as a sign that the government stimulus packages are already too late, with more than 10 million Americans having lost their jobs in this month already. Considering the US Labor Force is currently at 164 million, a 10 million combined figure of unemployment claims in the previous 2 weeks would put 6% of the American population without jobs. Added onto that the figure of 3.5% existing unemployment, and this could mean that close to 10% of the entire country is unemployed.
These figures are overwhelmingly in recession territory. Even during the global recession of 2008-2009, the number of jobless claims per week only reached 665,000 at its highest. Unfortunately even with the stimulus packages and rate cuts, businesses are laying off their employees en masse, especially in the hospitality and retail sectors, as those have been the hardest hit.
Conversely, oil posted its biggest one day gain yet, of 24.67%, after US President Donald Trump made a statement on Twitter that he had spoken to the Saudi Arabia Crown Prince Mohammed bin Salman, after previously promising to speak to Russian President Vladimir Putin, regarding the ongoing price war between the two countries. Trump stated that he expected the two countries to cut back on their oil production by 10, to possibly even 15 million barrels.
Immediately after the tweet was made, WTI crude jumped in price from $21.91 to $25.89, almost approaching $26 per barrel. However once the initial excitement faded, it once again fell back down, dropping below $24 at its low. This was most likely due to the fact that investors realised that even with a supply reduction, the demand isn’t high enough to drive prices back up. Of course, some were also doubting the validity of Trump’s tweets, questioning whether or not such a major agreement between the 3 largest oil producers in the world could even come to fruition.
The VIX volatility index has also decreased since the middle of the previous month, dropping from a record 82 points down to 50 now. Also known as the “Fear Index”, the VIX is a measurement of the level of expected volatility in the markets for the next 30 days, and is derived from the movement of the S&P 500. Initially moving below 20 points and holding steady, the VIX understandably surged following the global coronavirus pandemic, rising all the way to 82 points as the virus worsened across the world and economies ground to a halt. Despite unprecedented measures taken by Reserve Banks and governments around the world, such as the US Federal Reserve cutting the interest rate for the Dollar by 100 basis points, effectively dropping it 0%, as well as a $2 trillion economic stimulus package approved by the US Senate, volatility across all markets seemed to show no signs of wearing off. However, despite the drop in the VIX, a 50 point volatility forecast still represents a daily price change of around 3.4% for the S&P 500, which then translates to a +/-15% over the period of the month.
Economists have taken this as a sign that the government stimulus packages are already too late, with more than 10 million Americans having lost their jobs in this month already. Considering the US Labor Force is currently at 164 million, a 10 million combined figure of unemployment claims in the previous 2 weeks would put 6% of the American population without jobs. Added onto that the figure of 3.5% existing unemployment, and this could mean that close to 10% of the entire country is unemployed.
These figures are overwhelmingly in recession territory. Even during the global recession of 2008-2009, the number of jobless claims per week only reached 665,000 at its highest. Unfortunately even with the stimulus packages and rate cuts, businesses are laying off their employees en masse, especially in the hospitality and retail sectors, as those have been the hardest hit.
Conversely, oil posted its biggest one day gain yet, of 24.67%, after US President Donald Trump made a statement on Twitter that he had spoken to the Saudi Arabia Crown Prince Mohammed bin Salman, after previously promising to speak to Russian President Vladimir Putin, regarding the ongoing price war between the two countries. Trump stated that he expected the two countries to cut back on their oil production by 10, to possibly even 15 million barrels.
Immediately after the tweet was made, WTI crude jumped in price from $21.91 to $25.89, almost approaching $26 per barrel. However once the initial excitement faded, it once again fell back down, dropping below $24 at its low. This was most likely due to the fact that investors realised that even with a supply reduction, the demand isn’t high enough to drive prices back up. Of course, some were also doubting the validity of Trump’s tweets, questioning whether or not such a major agreement between the 3 largest oil producers in the world could even come to fruition.
The VIX volatility index has also decreased since the middle of the previous month, dropping from a record 82 points down to 50 now. Also known as the “Fear Index”, the VIX is a measurement of the level of expected volatility in the markets for the next 30 days, and is derived from the movement of the S&P 500. Initially moving below 20 points and holding steady, the VIX understandably surged following the global coronavirus pandemic, rising all the way to 82 points as the virus worsened across the world and economies ground to a halt. Despite unprecedented measures taken by Reserve Banks and governments around the world, such as the US Federal Reserve cutting the interest rate for the Dollar by 100 basis points, effectively dropping it 0%, as well as a $2 trillion economic stimulus package approved by the US Senate, volatility across all markets seemed to show no signs of wearing off. However, despite the drop in the VIX, a 50 point volatility forecast still represents a daily price change of around 3.4% for the S&P 500, which then translates to a +/-15% over the period of the month.
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