Are April’s unemployment stats a red herring?

While the numbers are cataclysmic, they don’t provide much insight on where the economy is headed, Briggs said.

“It’ll catch people’s attention, because we’ve never seen numbers this big in a month before,” Briggs said, but he added that Franklin Templeton isn’t “attaching a whole lot of importance” to the data.

“We had fully expected ‘cliff economics’ — everything just fell off a cliff in March and April,” Briggs said. “How’s it going to look on the other side?”

In positioning portfolios going forward, Briggs said he’d be paying closer attention to the speed at which the economy recovers as provinces gradually lift lockdown restrictions.

“When you restart the economy, what does the restart look like?” Briggs asked. “That’ll have a direct impact in terms of asset valuations and economic activity.”

Briggs said there are “multiple scenarios” for an economic recovery, ranging from a quick, V-shaped recovery, to a lengthy, L-shaped recovery, in which people are so spooked they don’t venture out to support businesses that reopen.

Restarting the economy, Briggs said, “should improve the unemployment rate,” but he added that Friday’s unemployment figures don’t capture everyone who’s out of work, such as those receiving the recently extended emergency wage subsidy.

“There is a scenario where you reengage the economy and then those on the emergency wage benefit aren’t recalled because the demand isn’t there,” Briggs said. “They may be off to the unemployment line because the demand just isn’t back.”

Briggs said Franklin Templeton’s base case is for a gradual economic recovery, but the firm’s projections will “constantly evolve” because there’s no base case to which Covid-19 can be compared.

“There’s really nothing to benchmark this to,” he said. “The last pandemic of any consequence was 100 years ago.”