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Private payrolls drop by 20.2 million in April

Private payrolls drop by 20.2 million in April

Coronavirus induced job losses continue to wreak havoc in the United States as private payrolls drop more than 20.2 million in April according to a report from ADP. This has surpassed the record for drops in private payrolls set by the Global financial crisis of 2008 – by 19.4 million.

The total number of the private payrolls decrease, 20,236,000, is comprised of 6m from small businesses, 5.27m from medium-sized businesses, and 8.97m from large-sized businesses. However, this is lower than the total 22m that economists at Dow Jones had been expecting. It is likely as the Coronavirus continues to ravage the United States with cases continuing to grow by at least 20,0000, that the private payroll numbers will continue to worsen. This is alongside the United States weekly jobless claims reaching an unprecedented 30 million over the past couple of weeks

Big names slashing large numbers

Large growth businesses are not immune to the damage the Coronavirus has done to the economy. Companies such as Airbnb laying off 1,900 workers or around 25% of their workforce alongside Uber cutting 3,700 workers, 14% of their workforce. Not to mention airlines, with the likes of Air New Zealand initially laying off 1500 cabin crew with an estimated 2,600 more job cuts, 30% of their workforce, in the future.

How are these numbers in comparison to the rest of the world?

Unemployment spikes have differed across the world as governments try to balance economic health with the health of their population. With governments tackling the issue differently, only time will tell if supporting businesses directly will be more beneficial in the long run in comparison to supporting businesses directly. For example, Australia has forecasted unemployment to reach 10%. ANZ’s Senior Economist Catherin Birch told 7 News in Australia that thee “government Jobkeeper Payment plan to keep people in work could temper the rise in unemployment to around 9.5%”. New Zealand is forecasting similar figures with similar results if the government implements appropriate financial support.

Coronavirus – changing the way we work?

As working from home has suddenly become the norm for many employees, it is yet to be seen whether this new trend will take off once the Coronavirus is behind us. For example, expensive business trips overseas may be replaced with free video calls, and tapping a colleague over the shoulder may be replaced with slack messages. A fundamental shift may be at play as the world population shifts to a more health-conscious way of living their lives.

How have the markets reacted to the private payrolls number?

The US markets were relatively muted to the news across the board with the SP500 and Dow Jones finishing .7% and 0.91% lower respectively. The NASDAQ edged higher by 0.51%. Volatility is at a 1 month low, with the VIX finishing just over 34, 26% lower than a month ago. It is also interesting to note the performance of the widely used benchmarks since the start of the year.

SP500 and NASDAQ's performance YTD

With the SP500 being down around 12.6% versus the NASDAQ being down only around 2.6%. This is primarily due to the NASDAQ being heavily weighted in tech at just under 50%, conveying that they have been doing the heavy lifting during these unprecedented times. Alongside this, European equities are preforming significantly in comparison to their American peers, down 20.34% for the year. However, taking a look at previous economic downturns, and a potential second wave, there may be more red to be seen in the economic markets before things get better.