October 02, 2020

Good morning! Was this email forwarded to you? Sign up here. (Today's Smart Brevity count: 1,168 words, 4 minutes.)

Situational awareness: U.S. stock futures, global equities and oil prices declined after President Trump announced he and the first lady were diagnosed with COVID-19, but currencies, bonds and most other assets saw limited movement. (Twitter)

🎙 "Thank goodness I was never sent to school; it would have rubbed off some of the originality." - See who said it and why it matters at the bottom.

1 big thing: What's underneath today's jobs report

Data: Department of Labor; Chart: Andrew Witherspoon/Axios

Today's U.S. nonfarm payrolls report is projected to show one of the best jobs growth numbers in history, but taken in context the expected number is abysmal.

  • Economists estimate the U.S. added around 857,000 jobs for the month, a decline from the 1.4 million added in August, and about half of the 1.7 million added in July.

By the numbers: The U.S. lost around 22 million jobs in March and April and since May has gained back around 11 million.

  • At a pace of 850,000 jobs a month it would take another 13 months for the U.S. to regain the jobs still not replaced.
  • However, data show the pace of jobs growth slowing.
  • And around 100,000 jobs need to be added each month simply to keep up with population growth.

Driving the news: The announcement of potentially hundreds of thousands of layoffs by airlines, insurance and oil giants, fashion companies and The Happiest Place on Earth this week made headlines, but the number of job losses is on pace with almost every other week over the past five months.

Watch this space: The coronavirus pandemic remains the leading reason for layoffs, but an increasing number of companies are citing other traditional recessionary dynamics as the reason to fire workers.

  • "In September, market conditions caused 45,213 of the announced cuts, followed by 33,713 job cuts due to demand downturn, and 11,562 cuts due to restructuring," Challenger, Gray & Christmas reported last month.

Between the lines: Many of those adding to the number of America's jobless are not counted as unemployed in the jobs report.

  • The biggest difference between the number of people currently collecting unemployment benefits and those on the rolls at the height of the 2007-2009 recession is the Pandemic Unemployment Assistance program, which included 11.8 million beneficiaries as of Sept. 12.
  • Most don't qualify for traditional unemployment benefits and are not counted in the monthly jobs report.

The Pandemic Emergency Unemployment Compensation program, which provides benefits for those who have exhausted traditional unemployment, now includes 1.8 million people.

  • A similar program created during the Great Recession rose to include as many as 5.9 million Americans at its peak.

Bonus chart: How the jobs gains stack up

Data: U.S. Bureau of Labor Statistics via FRED; Chart: Andrew Witherspoon/Axios

Today's jobs report will be the last before the presidential election on Nov. 3. The country has 11 million fewer workers employed than it did in February, or the equivalent of almost five years of job gains.

2. Catch up quick

The House passed a $2.2 trillion coronavirus relief package that has little to no chance of becoming law after House Speaker Nancy Pelosi failed to make headway in talks with the White House. (The Hill)

A letter signed by 50 U.S. senators urged the office of the U.S. Trade Representative to begin negotiations on a trade deal with Taiwan, a prospect that would infuriate China. (SCMP)

3. Pandemic threatens years of women's progress in the workforce

Data: U.S. Bureau of Labor Statistics; Chart: Axios Visuals

Axios' Fadel Allassan writes: More than a quarter of women in a survey of over 40,000 across 317 companies say they are considering downshifting their careers or leaving the workforce entirely, as the coronavirus pandemic has intensified challenges many already faced at work, a study by McKinsey & Company and Lean In shows.

Why it matters: It's an "emergency for corporate America," the report, which covered the U.S. and Canada, declares.

The big picture: This is the first time in the six years of analyzing the issue that McKinsey has seen signs of women exiting the workforce at higher rates than men, the firm wrote.

  • "If these women feel forced to leave the workforce, we’ll end up with far fewer women in leadership — and far fewer women on track to be future leaders."
  • It's especially of concern, McKinsey notes, because the firm's research indicates that companies in which women are well-represented in leadership are 50% more likely to outperform their peers.

The issue is more pronounced with mothers, for whom the research shows the pandemic is taking an even heavier toll.

  • 76% of mothers with children under age 10 say childcare has been among their top three challenges during the pandemic, compared with 54% of fathers.

Zoom in: The research indicates Latina and Black mothers — who are more likely to be their family's only breadwinners or to have partners working outside the home during the pandemic — face a greater burden than their white counterparts.

  • Latina moms are 1.6 times more likely to be responsible for all childcare and housework, while Black moms are twice as likely.

My thought bubble: This report is particularly worrisome because women's representation in the labor force has been trending backward since 2000 and has still not recovered from its drop after the 2008 Great Recession. In August, women's labor force participation rate was the lowest it has been since the late 1980s.

4. Dark clouds forming in emerging markets

Investors had been returning to emerging market assets in the second quarter and earlier in the third this year, but new data from the Institute of International Finance show a strong reversal that rivals the outflows seen after the 2013 taper tantrum and the 2015 Chinese currency devaluation scare.

Driving the news: JPMorgan strategists said they sold out of some EM assets ahead of expected uncertainty caused by the U.S. presidential election, adding that the president's coronavirus diagnosis could pull forward volatility.

The recovery: IIF estimates EM securities attracted around $2.1 billion in September, up from $0.7 billion in August.

  • EMTA, the Emerging Markets Trading Association, reported earlier this week that EM debt trading volume in Q2 stood at $1.31 trillion, an 8% increase from the same period in 2019, while down 12% from $1.49 trillion reported in the first quarter of 2020.
  • Local currency debt, which is considered riskier, also saw an increase from 2019 figures, rising 16% in the second quarter from the same period in 2019.

The relapse: IIF economists have seen a "fresh bout of market turmoil," arising in trading activity in recent weeks due to uncertainty about the U.S. election, a rejuvenated dollar and lingering questions about COVID-19.

  • The data found high frequency outflows from EM in the final weeks of September that rivaled the taper tantrum and devaluation scare, two of the biggest negative events in modern history for EM, and some countries are seeing selling pressure continue to build.

5. Investors sold everything last week

Despite strong gains to close out the month and the third quarter investors sold everything over the past week, with data from Refinitiv Lipper showing net outflows from stock, bond, municipal bond and money market funds for the eighth week in a row.

  • Conventional funds saw a net $15.9 billion in outflows for the week ended Sept. 30.

By the numbers: Equity ETFs saw $5 billion of net inflows, with $4.3 billion going toward domestic equities, and foreign equities saw net inflows for the seventh week in eight. The Nasdaq 100 ETF QQQ and SPDR S&P 500 ETF saw the heaviest inflows.

  • However, the inflows to ETFs were matched by outflows from traditional equity funds, leading to a negative net total for equities during the week.
  • Bond ETFs also saw net inflows for the week.

The intrigue: It was the 23rd week in a row that conventional stock funds saw net selling.

Thanks for reading!

Quote: "Thank goodness I was never sent to school; it would have rubbed off some of the originality."

Why it matters: On Oct. 2, 1902, author Beatrix Potter published "The Tale of Peter Rabbit" via Frederick Warne & Co. in London.

  • Potter was home-schooled, taught by her family's governesses and grew up isolated from other children.
  • She went on to write 30 books.