The cost of Covid-19 is becoming clearer.
Next Tuesday’s figures could show that the number of people on companies’ payrolls has fallen by almost a million in the past 12 months, and that the number of unemployed has risen to over 1.7 million, its highest since early 2016 – although there are also two million people out of the labour force who want a job.
Such figures understate the decline in labour demand. Other numbers on Tuesday will show that total hours worked – a better guide to overall labour demand – have dropped by more than 10 per cent in the past 12 months.
Nevertheless, there’ll also be good news in the labour market figures. They could show that for those who have kept their jobs wages are now rising again, by a little over 2 per cent on a year ago. Which means they are rising in real terms.
Wednesday’s numbers will confirm that inflation is no problem yet. They should show that CPI inflation is around last month’s 0.7 per cent, well below the Bank of England’s 2 per cent target. And in manufacturing, both input and output prices are down on a year ago.
Friday’s official retail sales numbers are likely to show a drop for November, thanks to the national lockdown – although the fall comes from a record high.
Flash purchasing managers’ surveys, however, should show that activity recovered a little in early December as that lockdown was lifted – although the CBI’s survey will remind us that manufacturing is still fragile with order books low and output expectations weak.
US figures should show small rises in both retail sales and industrial production in November – although the latter will still be some 6 per cent below its peak which was way back in December 2018. Surveys by the New York and Philadelphia Feds, however, might give some cheer as they could show that firms’ expectations for the next few months are high.
Eurozone data might be more downbeat, though, with purchasing managers showing falling activity in the service sector and only weak growth in manufacturing.
We’ll see next week what the Fed and Bank of England make of all this when they give their latest policy announcements. Both are likely to leave policy unchanged, but point to interest rates not rising for a long time.
We should also watch out for US capital flows data on Tuesday. These could show that non-Americans have been massive buyers of US shares in recent months. In the past, such buying has been a strong predictor of global equities falling in the following 12 months. To be bullish of equities now requires one to believe that relationship has broken down: this might be true, but it’s a strong bet.
