The Day at a Glance | May 8 2020

Historical unemployment figures in the US

Data on unemployment published by the Department of Labor this morning confirmed the largest setback in employment in the country`s history (20.5M), which tripled the rate of unemployment, setting it at 14.7%, its highest level since the Great Depression in 1929. According to the report, the calculation of the rate of unemployment didn`t consider temporarily unemployed people due to the virus, which prevented April`s rate to be 5% higher. Nevertheless, figures confirm the loss of practically all jobs created in the last decade in the US, and represent an important obstacle for the economy`s recovery. Wages increased extraordinarily to 4.7% annual (vs 3.3% prev.), given the fact that the loss of jobs was observed mainly in low paying occupations. This implies that the indicator doesn`t reflect upwards pressures on wages, rather the disappearance of low-wage jobs. The population`s rate of participation in the labor market fell to 60.2% (62.7% prev.) and underemployment increased to 22.8% (vs 8.7% prev.). Estimates regarding a recovery in employment vary widely, with some expecting a quick recovery once the economy reopens, and others projecting 10 or 12 years will need to go by before the rate of unemployment reaches levels seen prior to the pandemic.

China and the US agree to cooperate to fulfill trade agreement

In a telephone conversation had ahead of schedule, the US and China`s trade representatives discussed the “phase 1” agreement and agreed on creating a favorable environment for its implementation. Both countries assured that important advances have been made in terms of governmental organization and infrastructure to achieve the agreement`s goals, and the USTR affirmed in a statement that despite the health emergency, both countries expect to comply with the agreement`s goals in full and on time. The USTR also confirmed that it will continue to have regular meetings with China. The conversation`s participants included the US trade representative, Robert Lighthizer, the Chinese Vice Premier, Liu He, and US Treasury Secretary, Steven Mnuchin. The conversations were carried out after an escalation of tensions between both countries over the handling of the pandemic, which caused US President Donald Trump to threaten with new tariffs and take out production chains out of China.

Private investment and consumption contract in Mexico in February

Data published by INEGI confirmed a weak performance regarding two of the main components of the Mexican economy in February, prior to COVID-19`s impacts. Gross fixed investment contracted at an annual rate of (-) 10.2% (-1.7% monthly), with the largest falls being recorded in imported machinery and equipment (-15.9%). Investment in construction also fell (-8.7% annual) due to contractions in both, the residential and non-residential sectors. With this, fixed investment recorded 13 consecutive months of contraction at an annual rate. Concerning private consumption, February recorded the first annual rate contraction since March 2019 (-0.5% annual, seasonally adjusted figures), with falls in the consumption of national goods and services (-0.4%), as well as in imported goods (-0.8%). Trade balance figures, also published this morning, suggest that investment and consumption could have deepened their contractions in March, particularly in the demand of imported goods (where both show weakness). Imports recorded an acceleration in contraction during March – from (-) 3.84% in February to (-) 6.72% annually in March. Exports recorded their first contraction in March (-1.56% annual), undoubtedly related with the closure of the US economy. Data confirms the Mexican economy`s weakness prior to the virus`s impacts, and predict exceptionally low figures for the following months.