NEWS WRAP

Trump tries to quell oil row in the middle of a pandemic

• President Trump has spoken to Russian President Vladimir Putin and Crown Prince of Saudi Arabia Mohammed bin Salman about a resolution to the ongoing oil price war between their respective countries. Both major oil-producing nations have significantly ramped up oil production and exports in the last month, which have sent the global price to less than $US20 a barrel for the first time in nearly two decades. A protracted price war has the potential to devastate the US shale industry as well as to weaken a US economy already hampered by the COVID-19 pandemic. READ MORE HERE
   
• An Australian expat has found himself at the centre of the United States' debate about the need for face masks to be worn in public. Jeremy Howard, a Melbourne-born entrepreneur and data scientist at the University of San Francisco published an article in the Washington Post disputing "spurious" WHO and CDC advice that only those with COVID-19 and those caring for them should wear face masks. His article has spawned a hashtag #Masks4All, encouraging Americans to use homemade face masks and led to his briefing US senators on the topic. READ MORE HERE
   
• The captain of a US Navy aircraft carrier has pleaded for help from the Pentagon amid a COVID-19 outbreak on board his vessel. Captain Brett Crozier of the USS Theodore Roosevelt, which is currently docked in Guam with at least 100 cases of COVID-19 on board, wrote to the Pentagon proposing the more than 4,000 crew members of the ship be offloaded and quarantined. “We are not at war. Sailors do not need to die,” Captain Crozier wrote. Defence Secretary Mark Esper said he had not read the captain’s letter, and that it was not “at the point” where the full crew ought to be evacuated. READ MORE HERE
   
• The United States will not pay for the security of Prince Harry and Meghan Markle, President Trump has tweeted. The president wrote that despite being "a great friend and admirer of the Queen & the United Kingdom" the US would not fund their security detail. "They must pay!" he continued. This comes after reports that the royal couple has moved to Los Angeles from Canada. The pair controversially stepped back from royal duties in January and said they would spend their time between North America and the United Kingdom. READ MORE HERE

ANALYSIS

The US labour market is in the 'Great Suppression'

Dr Stephen Kirchner
Director, Trade and Investment Program

On Wednesday and Friday in the United States we will see the release of some important data on the US labour market for March. These data will only hint at the damage the pandemic is inflicting on US employment because they were collected the week of 9-13 March, the week before initial jobless claims started to rise and two weeks before the 3.2 million surge in initial jobless claims for the week of 21 March that was reported last Thursday.

The ADP employment survey to be reported tonight has economists expecting a decline of 200,000 in employment. The ADP survey is often used as a partial indicator for the non-farm payrolls survey released Friday. While they are highly correlated historically, the ADP survey is somewhat over-fitted to the historical official employment data and so often has only a loose fit for the most recent month’s non-farm payrolls report.

The non-farm payrolls report to come out on Friday has economists expecting a decline of 100,000 in employment, with the unemployment rate expected to rise from 3.5 per cent to 3.8 per cent. Hours worked are expected to show a substantial decline as businesses started to shut down.

While the starting point for the US labour market going into the pandemic is the strongest in many years, the forthcoming collapse in employment and rise in the unemployment rate will be unprecedented in speed and quite possibly in magnitude. Last week’s release of initial jobless claims for the week of 21 March broke all previous records.

Thursday’s release for the week of 28 March is expected to see a further 2.9 million claims, based on surveys of economists. However, the binary options on the initial claims data traded on the North American Derivatives Exchange imply a 55 per cent chance of a number in excess of 4 million and a 25 per cent chance of a number in excess of 5 million.

Needless to say, these are catastrophic numbers, which could ultimately see a double-digit unemployment rate in excess of the peak seen in the wake of the global financial crisis. The key issue for the labour market, however, will not be the magnitude of the increase in unemployment, which is now largely set in stone, but the duration. Ultimately, the US economy will be hostage to the success, or otherwise, of pandemic control.

If the pandemic can be contained in the next few months, the recovery in the economy is likely to be as rapid as the downturn. However, economic downturns have highly persistent effects on the labour market. While employment will serve as a timelier and more leading indicator of the downturn in activity, it will be a lagging indicator of the recovery.

VIRTUAL EVENT

The economic playbook for managing COVID-19

Lessons from the last economic downturn

The COVID-19 pandemic has all but assured a global recession. How successful will the global policy response be in softening the blow? How did US and Australian policymakers manage the last economic crisis in 2008? Are lessons learned in the last economic downturn relevant to today?

To discuss these issues, please join us for a webinar event featuring United States Studies Centre CEO Professor Simon Jackman in conversation with Non-Resident Expert David Uren.

Non-Resident Expert David Uren is one of Australia’s leading economic writers. He was the Economics Editor for The Australian from 2013 to 2018 and led that newspaper’s federal economic coverage for 15 years. He is author of several books, including his co-authored book with Lenore Taylor, Shitstorm, which examined the Rudd government’s management of the Global Financial Crisis.

VIDEO

New York Governor Andrew Cuomo speaks about his brother's COVID-19 diagnosis

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