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Will U.S. jobs reflect the full impact of the spread of the Coronavirus?

3 Apr 2020 01:17 PM

Today non-farm employment data will be issued in the United States which is expected that to reflect the full impact of the coronavirus outbreak, especially given that the US now has the largest number of infections worldwide.

So far, the number of infected people around the world has crossed the one million mark and the number of deaths has exceeded 50,000.

Projections indicate that the US economy will lose about 100,000 jobs in March, following the addition of 273,000 jobs in February, and that unemployment will rise to 3.8%. Looking at previous data released this week may help us see what today's data may offer.

Private sector employment data

The private sector lost 27,000 jobs in March, marking the first decline since September 2017, after adding 179,000 jobs in March. This data shows that small companies lost jobs, while larger companies added workers.

Manufacturing sector jobs

Manufacturing activity contracted, but worse than expected, as new orders recorded their lowest levels in 11 years, and the sector’s employment component shrank for the eighth month.

Weekly unemployment claims

For the second week in a row, the number of Americans applying for unemployment claims has jumped to record numbers, and according to the Department of Labour, this number is close to 10 million people.

This data confirms that we will see job losses in March, but to what extent?   Today's data may indicate that the worst is yet to come given that 80% of Americans will need to remain under domestic quarantine to contain the virus, which has led to the sudden stop to the country’s economy

Possible scenarios for market movements, according to the data:

Scenario 1: Less than 100,000 jobs lost (most likely)

Gold: We might see a rise in gold prices that could target $1640 an ounce

Dow Jones: We might see breaking strong support levels at 21,000, targeting 20,000 levels.

EURUSD: It may support the pair to remain above 1.0800 levels, then we could see a rise targeting 1.0900 / 1.0950

USDJPY: Support stays below the resistance level of 108.66, thus targeting 108/107.75.

Scenario two: losing more than 100,000 jobs (less likely)

Gold: We might see a strong rally targeting the $1670/1680 levels

Dow Jones: We might see a break of strong support levels at 21,000 levels, targeting 19,000 levels.

EURUSD: Supports the survival higher than 1.0800, then we could see a rise to target 1.10.

USDJPY: Would support prices to remain below the 108.66 resistance level, then we might see it returning to the strong support level at 107.

The third scenario: job registration (excluded)

Gold: We might see a strong drop below the $1600 levels, and could extend up to  $ 1570 levels.

Dow Jones: We might see 21,500 and 22,000 levels again.

EURUSD: It will continue its weekly decline and we may see it again at the 1.07/1.06 levels.

USDJPY: Resistance level is expected to exceed 108.66 and then target 109/109.70 levels.

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