construction projects in Madrid, jobless workers in Las Vegas
Investors hope US nonfarm payroll figures, out on Friday, will show further gains. Europe and China economic jobs and manufacturing data will also be released this week. © FT montage; Getty Images; Bloomberg

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Will the US job market continue to strengthen?

US employment data, due on Friday, will show investors whether the number of jobs added in August has extended a rebound that began in May as lockdowns eased.

Nonfarm payroll figures are set to show 1.58m jobs were added in August, down slightly from 1.76m in July, according to economists surveyed by Bloomberg. The July data marked the third consecutive month the gauge was in positive territory after crashing in April because of the coronavirus pandemic.

But as the US economic recovery continues to falter, applications for unemployment benefits have increased. US Department of Labor figures show they dipped below 1m in the opening week of August for the first time since March but rose to 1.1m in the second week before hovering near 1m for the week ending August 22.

The number of Americans receiving state unemployment support, however, fell to 14.5m from 14.8m by mid-August, far below the peak of 24.9m in May.

“Job losses continue at levels worse than any week seen in the Great Recession over a decade ago,” said Chris Rupkey, chief financial economist at MUFG.

He pointed to a slow introduction of a new pandemic-era government support scheme, which provides $300 a week to the unemployed, down from $600 under the previous policy that ended in July.

“The unemployed are getting more desperate by the day, and this points to darkening skies for the economy in August,” Mr Rupkey said. Richard Henderson

Can Europe sustain its nascent economic revival?

European retail sales and employment data will add to investors’ understanding of how the region is recovering from the coronavirus pandemic.

Jobless figures come first, on Tuesday, covering the month of July, while eurozone consumer spending data is due on Thursday.

Europe’s unemployment rate has been relatively stable compared with the sharp rise in US joblessness since the pandemic took hold in the spring, mainly because of the millions of Europeans who were put on government-subsidised furlough schemes

The unemployment rate for the bloc increased from 7.2 per cent in March to 7.8 per cent in June. On average, economists expect the furlough schemes to have helped the jobless rate to dip slightly to 7.7 per cent in July.

The strength of the labour market is crucial to support retail sales, which fell dramatically when the pandemic struck but have rebounded strongly since May and returned to pre-crisis levels in June. Economists on average expect the positive trend to continue with a 5.9 per cent rise in eurozone retail sales in July.

Nonetheless, most economists believe the recent rise in coronavirus infection levels across Europe could bring the economic revival to a jarring halt. “Rising caution may help limit a resurgence of [cases], but it will also negatively affect consumption,” said Vincent Allilaire, a senior credit officer at Moody’s. Martin Arnold

Can China continue its recovery momentum?

Tuesday brings manufacturing data from China.

In July, the Caixin gauge of the country’s factory activity beat expectations to rise at its fastest level in nine years, though the scale of the gains resulted in part from declines earlier this year because of the pandemic.

The measure is expected to show solid growth again in August, with economists predicting a reading of 52.3, slightly below July’s level of 52.8. Any reading above 50 shows expansion.

That would further solidify a sense of economic recovery, even from a weak base, as new cases of Covid-19 remain low.

Another rise in manufacturing activity would also come after data last week showed that profits at China’s industrial companies rose by 19.6 per cent in July — the fastest rate in more than two years. While that metric is still down 8.1 per cent on the year to date, it has risen in each of the past three months.

In July, the Caixin survey showed new export orders shrank for the seventh consecutive month. However, separate data from China’s customs bureau in August showed a sharp jump in exports in dollar terms, defying expectations of a decline.

This week’s PMI data, then, may provide more clarity on conditions on China’s factory floors. That, in turn, might hint at the direction of economic recovery far beyond its borders. Thomas Hale

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