Traders are set to return from last week’s holiday-shortened week to a bevy of new economic data on the labor market, as well as a handful of corporate earnings results.
The U.S. Labor Department’s November jobs report, due out on Friday, will be one of next week’s central reports — and one of the last comprehensive data releases on the labor market for 2020.
The path of the coronavirus outbreak has set the pace for the labor market’s recovery. And given November’s resurgence in case counts and hospitalizations, the job market has already showed renewed signs of trauma.
New unemployment claims, which are reported on a weekly rather than monthly basis, ended a month-long streak of declines and climbed again starting in mid-November. The upturn coincided with the timing of the Labor Department’s survey week for the monthly jobs report, suggesting more tepid improvements in November’s non-farm payroll gains and unemployment rate than in recent months.
To that point, Friday’s jobs report is expected to reflect a fifth straight month of slowing job growth, with consensus economists forecasting non-farm payroll gains of just 500,000 for the month after an increase of 638,000 in October. Most of the gains are expected to come from the private sector, and especially the service-providing industries hardest hit during the spring by initial lockdown orders due to the coronavirus pandemic. Government job losses that had weighed on October’s headline payroll figure due to a post-summer drop in temporary Census hiring likely abated during the month.
The U.S. economy still has a ways to go before fully making up for the drop in payrolls induced by the pandemic. Even with another half-million jobs expected to have come back in November, the economy would still be about 9.6 million jobs short of its pre-pandemic level in February.
November’s unemployment rate is also expected to have improved just marginally. The jobless rate likely fell to 6.8%, from the 6.9% reported in October. While down from a pandemic-era high of 14.7% in April, the jobless rate remains nearly double that from before the pandemic.
Against a backdrop of rising COVID-19 cases in the U.S., some companies have recently announced further workforce reductions to adjust for the still-depressed demand brought about by the pandemic. Disney (DIS) said last week it would lay off 4,000 more workers than previously announced mostly at its theme parks, and Goldman Sachs (GS) is reportedly pursuing an additional round of job cuts in a bid to consolidate costs. With travel demand still weak and no additional government aid assured, Southwest (LUV) has warned some 2,000 employees their jobs could be in jeopardy as soon as January, which would mark the first layoffs in the airline’s history.
At the same time, an influx of recent positive news on the vaccine front — with each of Pfizer (PFE), Moderna (MRNA) and AstraZeneca (AZN) releasing promising efficacy data for their vaccine candidates — has offered a glimmer of hope that the social distancing standards and other restrictions that have weighed so heavily on the labor market might get lifted for the long-term by the middle of next year.
“The next few months will be critical for the labor market’s recovery. With a vaccine finally in sight, life may begin to return to normal by next summer,” Wells Fargo Securities economists said in a note last week. “However, with new COVID cases elevated headed into the holiday season, and with many states imposing new restrictions on private activity, the next few months could be an especially tough stretch for the economy.”
“Even if monthly non-farm payroll growth is ‘only’ a few hundred thousand for the next few months, avoiding negative readings could help get us to another employment growth ‘bump’ post-vaccine,” they added.
Zoom Video Communications (ZM), the poster company for the stay-at-home trade, is poised to report third-quarter results Monday after the closing bell, offering investors clues as to whether the video conferencing company has managed to sustain its breakneck growth.
For its three months ending in July, Zoom’s sales surged by 355% year-over-year, accelerating from the previous quarter’s 170% increase. Revenue likely jumped another 316% during the October quarter, based on consensus analyst estimates compiled by Bloomberg. In August, Zoom Chief Financial Officer Kelly Steckelberg said the company would likely post top-line growth of as much as 314% to $690 million for its fiscal third quarter.
Zoom’s user growth also likely marched higher during the third-quarter, which encompassed the start of the back-to-school season when many institutions opted to conduct fully or partially remote learning. Customers with more than 10 employees – a closely watched cohort for Zoom – likely rose by nearly 17,000 to 386,660. During the same quarter last year, Zoom’s customers in this category had totaled fewer than 75,000.
The San Jose, California-based company’s meteoric growth during the pandemic has coincided with a stock price that rocketed nearly 600% higher year-to-date. For November to date, however, the stock has risen just 2.3%, and underperformed sharply against both the S&P 500 and small cap Russell 2000. Part of this weakness came after the Federal Trade Commission announced earlier in November that it had reached a settlement with Zoom over what it considered to be “deceptive and unfair practices” around Zoom’s claims of end-to-end encryption. The company agreed to establish a more comprehensive security program and avoid security misrepresentation as part of the settlement.
But more broadly, this month’s trio of encouraging COVID-19 vaccine announcements catalyzed a selloff in software stocks like Zoom that had benefitted from stay-in-place orders, amid anticipation that a return to in-person work and education might be just around the corner. Those fears, however, may be overdone, according to some analysts.
“While COVID-19 helped drive incredible recognition and uptake of Zoom’s best-of-breed product, it also made businesses recognize Zoom’s importance as a tool in the Work-From-Anywhere environment that is likely to emerge post-pandemic,” Mizuho Securities analyst Siti Panigrahi wrote in a recent note. “In our view, the company’s near- and long-term growth drivers remain intact, and its license-based (not usage-based) model provides downside protection.”
Monday: MNI Chicago PMI, November (59.0 expected, 61.1 in October); Pending Home Sales month-over-month, October, (1.0% expected, -2.2% in September); Dallas Fed Manufacturing Activity Index, November (15.8 expected, 19.8 in October)
Tuesday: Markit US Manufacturing PMI, November final (56.7 expected, 56.7 in preliminary print); ISM Manufacturing, November (58.0 expected, 59.3 in October); Construction Spending month-over-month, October (0.8% expected, 0.3% in September)
Wednesday: MBA Mortgage Applications, week ended November 27 (3.9% during prior week); ADP Employment Change, November (420,000 expected, 365,000 in October); Federal Reserve Beige Book
Thursday: Challenger Job Cuts year-over-year, November (60.4% in October); Initial Jobless Claims, week ended November 28 (765,000 expected, 778,000 during prior week); Continuing Claims, week ended November 21 (5.811 million expected, 6.071 million during prior week); Markit US Services PMI, November final (57.6 expected, 57.7 in prior print); Markit US Composite PMI (57.9 in October); ISM Services Index, November (56.0 expected, 56.6 in October)
Friday: Change in Non-farm Payrolls, November (500,000 expected, 638,000 in October); Unemployment Rate, November (6.8% expected, 6.9% in October); Average Hourly Earnings month-over-month, November (0.1% expected, 0.1% in October); Average Hourly Earnings year-over-year, November (4.2% expected, 4.5% in October); Trade Balance, October (-$64.8 billion expected, -$63.9 billion in September); Factory Orders, October (0.8% expected, 1.1% in September); Durable Goods Orders, October final (1.3% expected, 1.3% in prior print); Durable Goods Orders Excluding Transportation, October Final (1.3% expected, 1.3% in September); Non-Defense Capital Goods Orders Excluding Aircraft, October Final (0.7% in September); Non-Defense Capital Goods Shipments Excluding Aircraft, October Final (2.3% in September)
Monday: Zoom Video Communications (ZM) after market close
Tuesday: Salesforce (CRM) after market close
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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