The US consumer confidence numbers for January are out from the Conference Board. The main confidence index is slightly higher than expected, at 89.3 (versus forecasts of an 89 reading). However, the December reading was revised lower to 87.1 from 88.6.

US stocks are now expected to open slightly higher, after positive results from a number of companies including General Electric and Johnson & Johnson, as the US Federal Reserve started its two-day policy meeting.

Johnson & Johnson forecast 2021 profits above Wall Street estimate and promised to publish data from its eagerly awaited coronavirus vaccine trial soon. It’s a single-shot vaccine – unlike the other vaccines that have already been approved and require two jabs – which would make it much easier to administer.

Etsy shares jumped 9% after Tesla boss Elon Musk, a somewhat unlikely aficionado of the online marketplace for handmade and vintage items, tweeted out of the blue that he “kinda loved” it and had bought “a hand knit wool Marvin the Martian helm for my dog”.

Etsy rose to a high of $232.39 in pre-market trading, compared with Monday’s closing price of $208.81. It is set the be the biggest riser in the S&P 500 when markets open in just under 20 minutes.

Also today, Jefferies raised its 12-month price target on Etsy to $245 a share, the highest estimate on Wall Street. Jefferies analyst John Colantuoni explains:

We believe behavioural changes incited by the pandemic allow Etsy to tap a broader portion of its $1.7 trillion addressable market, leading to higher frequency and spending.

BlackRock has threatened to sell its shares in the worst corporate polluters, as the world’s largest asset manager pledged to support the goal of net-zero carbon dioxide emissions by 2050, writes my colleague Jasper Jolly.

Larry Fink, BlackRock’s chief executive, said the coronavirus pandemic had increased focus on existential climate risks, in his annual letter to chief executives around the world.

BlackRock has significant influence with companies, investors and governments because of the vast array of shares, bonds and other assets its controls, worth $8.7tn (£6.4tn) at the end of September.

With the new Biden administration preparing to pump an extra $1.9tn into the US economy and Chinese economic growth likely to surge to 8.6% this year, much of it after a huge boost from state-sponsored investment, the prospect for higher growth than foreseen last October has improved, the IMF says.

The upgrade is particularly large for the advanced economy group, reflecting additional [government] support – mostly in the United States and Japan – together with expectations of earlier widespread vaccine availability compared to the emerging market and developing economy group.

Here is our full story on the IMF’s latest forecasts:

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, has looked at the CBI survey in more detail:

The CBI’s survey is broadly consistent with our assumption that retail sales volumes will fall by about 5% month-to-month in January, in response to the imposition of the current lockdown.

The reported sales balance fell to its lowest level since May, though as it does not reflect the magnitude of any changes in sales being experienced by retailers, it would be overly pessimistic to assume that sales will decline to May’s level, which was 15% below December’s.

The list of retailers that still can open is broader than in Q2, and non-essential retailers are able to provide click-and-collect services. Even so, all available evidence currently suggests that sales in January will fall well below the level during the second, half-hearted lockdown in November.

Online sales have boomed, but most highstreet retailers are struggling and a number of well-known names have gone out of business, especially clothing stores.

Yesterday the online fashion retailer Boohoo acquired the Debenhams brand and its online rival Asos said it was poised to buy the Topshop, Topman and Miss Selfridge brands from the administrators of Sir Philip Green’s Arcadia retail empire. This means that Debenhams – which traces its roots back to 1778 – will disappear from the high street. A total of more than 20,000 retail jobs are at risk from store closures, as the online retailers don’t operate physical shops.

Von der Leyen also reiterated that companies manufacturing Covid-19 vaccines must honour their contractual supply obligations. She added that Brussels would set up a mechanism to monitor vaccine exports from the EU.

AstraZeneca told the EU last week that it could not meet agreed supply targets by the end of March, which has led to a row between the company and the EU commission.

The European commission president said at the virtual Davos meeting:

Europe invested billions to help develop the world’s first Covid-19 vaccines. To create a truly global common good. And now, the companies must deliver. They must honour their obligations.

This is why we will set up a vaccine export transparency mechanism. Europe is determined to contribute. But it also means business.

The EU threat will not impact vaccine deliveries to the UK, according to the UK’s vaccines minister, Nadhim Zahawi. Concerns over vaccine supply in the EU prompted the bloc to tell pharmaceutical companies they can only export to Britain with its explicit permission.

At the virtual Davos meeting, the European Commission president Ursua von der Leyen has just finished her speech.

She talked about the urgent global need to vaccinate against Covid-19 and stressed the importance of vaccines reaching all countries around the world.

She also spoke about her concerns about the future of democracy and the role big tech companies have in determining the quality of information that consumers receive.

Von der Leyen then turned to the scientific evidence which shows that biodiversity loss and global pandemics are linked, and urged global leaders to act on climate change.

We must learn from this crisis.

We have to change the way we live and do business to be able to keep what we value and hold dear.

The gains on the Italian stock market come despite political turmoil: the country’s prime minister Guiseppe Conte is poised to resign this morning in a tactical move, in the hope of being given the opportunity to put together a new coalition and rebuild his parliamentary majority.

And on the vaccine front...

European markets are enjoying a bounceback today, after sliding in the last two trading sessions (while US stocks have fared much better, with the Nasdaq closing at a record high again last night). Germany’s Dax is 1.36% ahead while France’s CAC and Italy’s FTSE MiB have gained about 1%.

Even the FTSE 100 index is trading 0.61% higher, a gain of 40 points, at 6,678, despite the grim unemployment data this morning.

Connor Campbell, financial analyst at Spreadex, says:

The FTSE’s gains are the most peculiar. Up 0.7%, the UK index chose to try and force a positive angle on a jobs report that saw redundancies at a record high, and the unemployment rate hit 5% for the first time since mid-2016.

Yet that rise in the unemployment rate still leaves it short of the 5.1% forecast. The average earnings index surged past estimates, at 3.6% against the 2.9% estimated. And, in the most recent piece of data, December’s claimant count change reading came in at just 7.0k, a fraction of both the 38.1k seen the month prior, and the 47.5k analysts had expected.

It helped the FTSE that the pound took the heat out of the negative elements of the report, falling 0.3% against the dollar and 0.2% versus the euro.

Even with that 0.7% increase, things aren’t looking good for the FTSE. Though it has a bit of room yet until it reaches the levels it opened the year at – it is hovering around 6,675, compared to the sub-6,500 price it started at on January 4^th – it has almost erased all of the super-surge seen on the 6^th.

Concerns over the length of the UK’s current lockdown remain an underlying issue for the index, especially since the Conservative party seem to have shifted their strategy away from the make-and-then-break promises policy of 2020.

However, the US open this afternoon may undermine the morning’s European growth. The futures have the Dow Jones heading for a 0.2% decline, leaving it a smidge above 30,900.

Here’s our full story on Rolls-Royce, which has become much gloomier about the prospects for air travel this year, as it looks like Covid-19 restrictions could last into the summer.

Sentiment among German exporters has become “considerably brighter,” says the Ifo institute. In January, the ifo export expectations in manufacturing rose from 1.9 points to 6.0 points. This is its highest level since October. Here’s more detail:

Manufacturers of computers and electrical equipment expect to see major increases in exports. Companies in mechanical engineering and the chemical industry are also confident about their future exports. Expectations among food and beverage manufacturers also saw a marked recovery. They currently assume their export business will hold steady. The international market is still difficult for Germany’s clothing industry. Furniture manufacturers also expect their international sales to decline.

You can read more here.

There have also been reports from Germany that the Oxford University/AstraZeneca Covid-19 vaccine is not very effective for older people, saying that it is just 8% effective for those over 65.

Prof Stephen Evans, professor of pharmacoepidemiology at the London School of Hygiene & Tropical Medicine, says:

There needs to be much more detail of any study of vaccine effectiveness before offering comment.

The randomised data on immunogenicity does not suggest that there will be notably lower efficacy at older ages for the Oxford/Astra Zeneca vaccine.

If however, these reports are based on the preliminary randomised trial data from The Lancet paper, it was stated there “As older age groups were recruited later than younger age groups, there has been less time for cases to accrue and as a result, efficacy data in these cohorts are currently limited by the small number of cases, but additional data will be available in future analyses.”

For example, it could be that a lower confidence interval was calculated on very preliminary data based on very few cases with a very wide interval, then a very low value of efficacy would be found, which would be misleading. The authors of The Lancet paper say additional data will become available and it will be best to rely on those data.

The TUC (Trades Union Congress) has urged the UK chancellor to extend the job retention scheme again to save jobs.

The two largest rises in unemployment last year occurred in months when support was reduced or expected to end, the TUC notes. In July, when the initial job retention scheme ended and a modified scheme reduced levels of support, unemployment rose by 17%.

And in October, when the job retention scheme was due to fully end on 31 October (an extension into 2021 was not announced until 5 November), unemployment rose by 8%.

TUC general Secretary Frances O’Grady says:

The more people we keep in work, the faster we can recover. But with the job retention scheme set to end in April, millions of people’s jobs hang in the balance.

When the government planned to withdraw support last autumn, despite restrictions still being in place, unemployment surged. We can’t let that happen again.

It’s time to end the uncertainty and anxiety. The chancellor must urgently extend furlough support to the end of the year to keep jobs safe.

In other news, Janet Yellen was confirmed as the first woman to head the US Treasury last night.

The former chair of the Federal Reserve and noted economist was approved by the Senate on an 84-15 vote, writes Dominic Rushe in New York. She sailed through a congressional hearing last week and had already been unanimously approved by the Senate finance committee and backed by all living former treasury secretaries.

Speaking at the digital Davos event last night, China’s president, Xi Jinping, sent out a warning to Joe Biden that he risks a new cold war if he continues with the protectionist policies of his predecessor, Donald Trump.

In an address to the virtual World Economic Forum event, Xi called for a multilateral approach to solving the economic crisis caused by Covid-19 and said the pandemic should not be used as an excuse to reverse globalisation in favour of “decoupling and seclusion,” writes our economics editor Larry Elliott.

Here is our full story on the labour market figures:

The EY Item Club, a leading economic forecasting group, have sent us their thoughts on the UK jobs market. Howard Archer, the chief economic adviser, is predicting the unemployment rate will peak at 7% in the summer, before a gradual improvement in the jobs market from the autumn, assuming the vaccine rollout goes well.

• While weaker, the latest labour market data show considerable resilience, suggesting the extension of the furlough scheme to the end of April is having some limiting impact on job losses. The labour market would likely have been affected by the renewed lockdown and restrictions in October and November.
• There was still a decline in the latest labour market data with redundancies rising to a record high of 395,000 in the three months to November. The number of unemployed people rose by 202,000, while the unemployment rate rose to 5.0% – taking it to 5% for the first time since early 2016. However, this was a smaller rise in the unemployment rate than had been expected. Employment fell 88,000.
• Even with the extension of the furlough scheme, pressure on the labour market is likely to increase with the economy expected to contract in Q1 2021 and the widespread closure of hospitality and leisure companies as well as non-essential retailers.
• The EY ITEM Club suspects that the unemployment rate could reach 7.0% around the middle of 2021, although the forecast peak is both lower and later than had been expected before the extension of the furlough scheme from its original ending date of October 2020.
• The EY ITEM Club believes the labour market will start gradually improving from the autumn, assuming the economy is stronger over the second half of the year and business confidence – supported by vaccine roll-outs – is firmer.

Hinesh Patel, portfolio manager at Quilter Investors, has taken a broader look.

Job losses are concentrated in certain industries, particularly the accommodation and food services sectors, with part-time and self-employed workers bearing the brunt of the pain.

The imposition of fresh lockdown restrictions means we are living in this state of suspended animation for much longer than anticipated, delaying our recovery for a little while yet.

And the slow death of the high street has got a little bit quicker this week following the news that Boohoo will purchase Debenhams’ online offering and that Top Shop looks set to be sold to Asos.

Brexit indigestion, too, will add red-tape and costs to businesses trading with Europe. These businesses will attempt to mitigate these costs as much as possible, and employment could suffer as a result.

However, despite a clear case of the January blues, there are still reasons to be cautiously optimistic. The international vaccine roll-out is providing hope that there is resolution for the health pandemic, while the fiscal and monetary authorities support should cushion the impact of the jobs pandemic.

The Institute of Directors has called on the chancellor to extend the government’s job retention scheme and other support measures beyond the spring.

Tej Parikh, the IoD’s chief economist, says:

The pandemic continues to rip through the labour market. A return to tighter restrictions late last year will have stretched businesses’ ability to retain staff. Meanwhile, the furlough scheme will have provided an invaluable cushion for many firms, preventing unemployment from edging up even further.

It is now crucial that the Job Retention Scheme and other Covid-19 economic support is extended beyond the spring to support employment as restrictions continue. The latest lockdown will have only added further pressure on firms with troubled balance sheets, which means more jobs are likely to be lost in the coming months.

The forthcoming budget is a vital moment to help firms retain, retrain and rehire workers as the vaccine rolls out. In particular, the government should provide a relief for employers’ national insurance contributions and support reskilling opportunities to shore up the recovery.

Despite the bounceback in people’s pay (to 3.6% annual growth), the ONS estimates that underlying wage growth is less than 2%. It explains:

Annual growth in average employee pay continued to strengthen, but this growth is increasingly being driven by compositional effects of a fall in the number and proportion of lower-paid employee jobs.

Current average pay growth rates are being impacted upwards by a fall in the number and proportion of lower-paid jobs compared with before the coronavirus pandemic; it is estimated that underlying wage growth – if the effect of this change in profile of jobs is removed – is likely to be under 2%.

Samuel Tombs, chief UK economist at the consultancy Pantheon Macroeconomics, warns that the unemployment rate will rise further, probably 6% in the spring, once the government’s job retention scheme ends:

The labour market no longer is deteriorating, with employment falling in November at the slowest three-month-on-three-month pace since March and payroll employee numbers recovering fully from November’s drop in December.

For now, the Coronavirus Job Retention Scheme is providing struggling firms with a costless way of temporarily not paying staff, but preserving the option to employ them in future. Survey measures of near-term employment intentions point to only modest job losses over the winter.

Nonetheless, the CJRS is due to be wound up at the end of April, and additional measures to support employment that will be announced in the Budget on March 3 probably will not be anywhere near as generous for firms.

It remains likely, therefore, that the unemployment rate will jump in Q2, probably to about 6%, when many firms—especially in the retail and consumer services sectors—likely will not ask all of their furloughed staff to return to work, and some people who left the workforce at the start of the pandemic return when the economy has reopened.

Indeed, the number of people who are technically inactive but who would like a job was up 75K year-over-year in the three months to November, while at least 600K non-UK nationals left the U.K. last year and might return later this year, provided they submitted the right paperwork before they left.

Here are some of the other key findings in the UK labour market figures:

• The Claimant Count increased slightly in December 2020, to 2.6 million; this includes both those working with low income or hours and those who are not working.
• There were an estimated 578,000 vacancies in the UK in October to December 2020; this is 224,000 fewer than a year ago and 81,000 more than the previous quarter.
• Growth in average total pay (including bonuses) among employees for the three months September to November 2020 increased to 3.6%, and growth in regular pay (excluding bonuses) also increased to 3.6%.

However, some economists can see light at the end of the tunnel.