US dollar firms as jobs created in a decade disappear within a month

The US dollar rose after the Labour Department released the jobless claims data for the previous week. The data showed that more than 5.2 million Americans filed for unemployment insurance in the week ending on April 10.

US jobless claims data

The number released today was lower than the 6.6 million that was released last week. Analysts polled by Dow Jones were expecting the number to be 5.1 million. Those at Moody’s (NYSE: MCO) were expecting the data to be more than 6 million.

The data released today means that more than 21 million Americans have filed for unemployment insurance in the past four weeks. This is the highest number ever recorded in American history and represents more than 6 per cent of the total population. It also means that most jobs created after the great recession have been wiped out. The report said:

“The advance seasonally adjusted insured unemployment rate was 8.2 percent for the week ending April 4, an increase of 3.1 percentage points from the previous week’s unrevised rate. This marks the highest level of the seasonally adjusted insured unemployment rate in the history of the seasonally adjusted series.”

Meanwhile, the continuing jobless claims rose to 11.97million from last week’s 7.4 million. This number measures the number of unemployed people who qualify for jobless benefits. These numbers risk taking the US unemployment rate to the highest level since the Great Depression. In the most recent jobs report, the rate jumped from a 50-year low of 3.3 per cent to 4.4 per cent. According to Bloomberg, the number could jump to more than 20 per cent if the ongoing lockdowns continue.

The unemployment claims have risen as more companies have furloughed their employees. Just yesterday, Best Buy announced that it would furlough its more than 50,000 employees. Other companies that have done this are General Electric (NYSE: GE), Boeing (NYSE: BA), and Walt Disney (NYSE: DIS) among others.

Other companies have requested their employees to enrol for unemployment benefits while others are receiving money from the government to keep employees on their payrolls.

A series of negative data

The jobless claims came as the US continues to release some of the worst numbers ever. Yesterday, the country reported more than 2,400 coronavirus related deaths bringing the total to more than 28,000.

As we reported yesterday, the retail sales dropped by 8.7 per cent in March while the mortgage industry is showing some cracks. In New York, the manufacturing index declined to the lowest level in history, according to data from the Fed.

Worse, the national industrial output declined by 5.4 per cent in March while capacity utilization fell to 72.77%. Meanwhile, manufacturing production drooped to the lowest level since 1946, driven by a sharp decline in the auto sector.

And today, data from the Census Bureau showed that housing starts in March dropped to 1.2 million from the previous 1.56 million. Building permits declined to 1.35 million from the prior 1.45 million while the number of completions was more than 1.2 million. This is understandable since most people remained at home in March.

The US dollar also reacted to the Philadelphia Fed manufacturing index. The data showed that the index dropped to -56.6,which is its lowest level on record.

Further, the earning season has shown a serious strain in the economy. Results from most banks such as Goldman Sachs (NYSE: GS), JP Morgan (NYSE: JPM), Bank of America (NYSE: BAC), and Wells Fargo (NYSE: WFC) have been disappointing. Today, data from Morgan Stanley (NYSE: MS) and Blackrock (NYSE: BLK) showed that their earnings dropped by 32 per cent and 23 per cent respectively. The earnings from most of these banks have dropped by more than 40 per cent.

The weakness in the banking sector means that other industries will struggle too during this earnings season. According to FactSet, the hospitality, entertainment, and energy will be the worst-performing sectors in the first quarter.

US dollar technical outlook

On the four-hour chart, the US dollar index is trading on the resistance line of the descending triangle pattern. The price is also stuck at the 50-day and 25-day exponential moving averages and at the intersection of the Ichimoku cloud. This means that the index may continue ring if it manages to move above the resistance line shown in black.