Payrolls Digest Payrolls Digest Payrolls Digest

Payrolls Digest

Summary:  Enjoy the good news while it lasts.

  • June payrolls rose 4.8mn significantly beating consensus expectations for 3.2mn
  • Unemployment rate fell to 11.1% from 13.3%, also falling to below consensus estimates of 12.5%
  • Initial weekly jobless claims remain stubbornly high, rising to 1.42mn from 1.48mn and remaining above expectations
  • Continuing claims rose to 19.3mn from 19.2mn

Larry Kudlow touts the report as “Spectacular!”, President Trump thinks this is evidence the economy is “roaring back”, the market likes it but behind the cheerleading what does the data tell?

Firstly, the nature of this crisis and the sudden stop to activity with the economic shock being so deep and widespread means that the initial snapback as the economy reopens, by default of the sheer depth, will seem forceful. But this is not a particularly good indicator of the future trajectory of the economy, post that initial economic boost. This is clearly visible in the payrolls report via the job gains being most concentrated in hospitality, leisure and retail as these areas of the economy have been boosted by an initial pent up demand as restrictions have eased, having reopened after a period of lockdown. The jobs recovered are not broad based across multiple industries and even in the sectors that have seen the biggest increases, employment is far from pre-crisis peaks. And with the virus resurgent gains in these sectors are unlikely to last.

The data beat relative expectations is good news, but we cannot lose sight of true perspective and underlying trends beyond the headline numbers. Employment is still 9.6% below its February level with 17.8mn remaining unemployed, making the jobs “recovered” relatively meagre in comparison to jobs that have been shed.

Furthermore, the data is truly looking in the rear-view mirror, only capturing the employment picture in the week ended June 13, and with the spread of the virus accelerating again, the same pace of continued improvement will be hard to come by. Job gains will slow with the virus resurgence and the July numbers will likely disappoint.

More broadly, this is not just true of the employment data. As the Citi US Economic Surprise Index chart below demonstrates, data has not been as bad as initially feared evidenced by the improvement in economic surprises. As expectations are raised and the surprise index sits at elevated levels market participants may be primed for disappointment.

The US is now reporting over 51,000 new coronavirus cases a day, the 3rd record high in a row, and confirmed cases are rising in 40 of 50 US states. Consumer behaviour is changing as the virus spread accelerates and with job gains centred in those areas of the economy which will be hit once again as cases rise the recovery will be derailed. This trend will also be enhanced as the expanded Unemployment Insurance programme expires at month end also hitting demand unless the programme is extended.

Even though in states where the virus spread is accelerating, state governments have not reimposed full lockdowns, reopening’s have been paused, some restrictions centred around bars and pools have been enacted and mobility and restaurant data shows that peoples own behaviour is different as many look to protect their own health.

More pertinent, is beyond the initial resumption in economic activity and jobs that are reinstated we likely have a prolonged period where unemployment will remain high, now with the virus still rampant in Q3 and layoffs stubbornly high doesn’t make for a speedy return to pre-COVID levels.

In contrast to the employment report jobless claims data paints a contradictory picture. New jobless claims have remained persistently high, along with increasing continuing claims and those reporting permanent job losses have also jumped higher. This will create a longer lasting drag on activity and plateau the recovery even as the economy reopens. Florida and Texas, two populous states where the virus case count has been accelerating rapidly, also reporting increases in continuing claims, highlighting the drag that comes with the easing of restrictions too early as the virus takes off again.

These underlying trends outlined above are similar to that illustrated by PMIs. There is an initial bounce back in activity as economies reopen, but this expansion comes from a very depressed level. A small proportion of jobs have recovered from a staggering number that have been lost. This is consistent with lockdowns being lifted but my no means indicates a return to prior levels of activity. PMIs shooting up towards 60 would be more in keeping with the narrative of a V-shaped recovery. But this is not the case, most remain around 50 or even below 50 signalling a stabilisation in the collapse in activity or a continued contraction in activity, but at a slower pace. The V-shaped recovery is a myth!

As these trends were digested, along with news of the continued virus spread as California and Arizona both reported their largest increase in daily cases yet, gold reversed early losses and climbed back later in session as traders dug below the headline jobs beat.


The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (
Full disclaimer (
Full disclaimer (

Saxo Bank (Schweiz) AG
The Circle 38

Contact Saxo

Select region


All trading carries risk. Losses can exceed deposits on margin products. You should consider whether you understand how our products work and whether you can afford to take the high risk of losing your money. To help you understand the risks involved we have put together a general Risk Warning series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. The KIDs can be accessed within the trading platform. Please note that the full prospectus can be obtained free of charge from Saxo Bank (Switzerland) ltd. or the issuer.

This website can be accessed worldwide however the information on the website is related to Saxo Bank (Switzerland) Ltd. All clients will directly engage with Saxo Bank (Switzerland) Ltd. and all client agreements will be entered into with Saxo Bank (Switzerland) Ltd. and thus governed by Swiss Law.

The content of this website represents marketing material and has not been notified or submitted to any supervisory authority.

If you contact Saxo Bank (Switzerland) Ltd. or visit this website, you acknowledge and agree that any data that you transmit to Saxo Bank (Switzerland) Ltd., either through this website, by telephone or by any other means of communication (e.g. e-mail), may be collected or recorded and transferred to other Saxo Bank Group companies or third parties in Switzerland or abroad and may be stored or otherwise processed by them or Saxo Bank (Switzerland) Ltd. You release Saxo Bank (Switzerland) Ltd. from its obligations under Swiss banking and securities dealer secrecies and, to the extent permitted by law, data protection laws as well as other laws and obligations to protect privacy. Saxo Bank (Switzerland) Ltd. has implemented appropriate technical and organizational measures to protect data from unauthorized processing and disclosure and applies appropriate safeguards to guarantee adequate protection of such data.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc.