The virus increases the gap in the Americans' wealth (Afternoon analysis 8.05.2020)

20.5 million jobs evaporated from the US economy, and the unemployment rate could reach even 20% in April. However, the pandemic hit society very unfairly: those with the lowest wages lost their jobs, which led to a considerable increase in the average monthly wage. The dollar and zloty remain stable.

Disastrous data and the reality is likely to be even worse

The key information awaited by the market was the publication of the report on the US labour market in April. As expected, it was disastrous. Nevertheless, the main metrics turned out to be better than expected. The decrease in employment was 20.5 million (22 million was expected), and the unemployment rate increased to 14.7% (16.0% was expected). However, there are several problems with these "better" than consensus data.

The surveys, on which the report was created, were conducted until mid-April. The Bureau of Labour Statistics (BLS), a unit of the Labor Department responsible for the report, indicated that 70% of respondents answered to the household survey - 13 percentage points less than in the months preceding the pandemic. Moreover, in connection with the pandemic, there were also problems with classifying people as unemployed - some of those who were absent from work were classified as employed. However, if they had been classified correctly, the BLS estimates that the unemployment rate would have been nearly 5 percentage points higher, i.e. would have reached almost 20%.

Wages increase, but this time it does not mean pay rises

The labour market report for April shows another negative impact of the restrictions imposed in connection with the pandemic: the disproportion between the wealthy and the poorer part of society is growing strongly. This is well illustrated by the distribution of the unemployment rate in relation to education. The percentage of unemployed people without secondary education rose to 21.2%, from 17.3 % on average, while the percentage of those with higher education to 8.4%.

As a result of relatively greater absence from the labour market of those earning the lowest wages, there was a huge increase in salaries. The average hourly wage increased by 4.7% only in one month, almost 10 times more than expected (and 7.9% per year). The growing gap in the wealth of society will be one of the problems that the economies will most likely face as the following recovery takes place.

One more index shows how an unprecedentedly strong impact the pandemic had on the world's largest economy. Before the coronavirus, the level of professional activity reached 63.4 %, which was the highest level since 2013. In April, this percentage fell to the lowest level since 1972. Given that the data for the report came from surveys only until mid-April, we can also expect weaker data in the report for the month when the revisions take place.

Currencies with limited changes

Less than an hour after the New York Stock Exchange session began, changes in the broader market were limited. Investors largely expected and received a historically dire report. Today, the dollar should not gain strongly, which may stabilise the zloty.

Today, the zloty's quotations against the main currencies moved close to yesterday's closing level (the EUR/PLN approx. 4.55, the USD/PLN approx. 4.20). This relatively limited fluctuation range should be maintained until next week when we learn more macro data from Europe, which may affect the valuation of the zloty. However, with the current market focus on recovery, only data indicating the pace of recovery to the pre-pandemic situation (to some extent for May and June) and the disparities in this pace between economies may trigger somewhat more significant changes in the foreign exchange market.