Market Commentary - June 8, 2020Submitted by Lifetime Wealth Strategies on June 9th, 2020
The employment report electrified U.S. stock markets last week.
American stock markets responded enthusiastically to the news U.S. unemployment was 13.3% in May. If it seems inexplicable double-digit unemployment would thrill investors, there is a reason. The unemployment rate in April was higher at 14.7%, and analysts had forecast the rate in May would jump to 19.1%. All in all, that makes 13.3% look pretty attractive.
There were some caveats.
First, “If the workers who were recorded as employed but absent from work due to ‘other reasons’… had been classified as unemployed on temporary layoff, the overall unemployment rate would have been about 3% points higher than reported,” explained the Bureau of Labor Statistics (BLS). The same would have been true of April’s numbers so month-to-month, the numbers still dropped.
Second, there is more than one measure of unemployment.
- U3 measures people who are unemployed and seeking work.
- U6 includes unemployed, underemployed (part-time workers who want to be working full-time), and discouraged workers. It’s usually a higher number.
The May Employment Summary Report showed U6 unemployment was 21.2%, down from 22.8% in April. That suggests 1 in 5 Americans is not working as much as they would like to be.
The BLS wrote the improvement in unemployment reflected, “…a limited resumption of economic activity that had been curtailed in March and April due to the coronavirus (COVID-19) pandemic and efforts to contain it.” The biggest job gains were in leisure and hospitality, construction, education and health services, and retail trade.
The lower month-to-month numbers may be a sign the Paycheck Protection Program (PPP) worked:
“…give some credit to the government relief efforts, especially the [PPP], for bringing back jobs. The program gave relief to small businesses…through loans that would not have to be paid back if most of the money went to rehire and pay employees. PPP money had to be used right away, and a lot of it started hitting small businesses’ bank accounts in late April and early May, which ended up triggering a net gain of 2.5 million jobs in May,” reported Heather Long of The Washington Post.
Eurozone stocks rallied last week, too, after the European Central Bank increased its quantitative easing program and extended support to June 2021, reported Dhara Ranasinghe and Yoruk Bahceli of Reuters.
Necessity is the mother of invention
Individuals, organizations, government, and companies have been identifying problems and finding ways to solve them:
- How much toilet paper is enough? As consumers cleared shelves, a company in Germany developed a toilet paper calculator to help determine how much is enough. “A person with a stockpile of 10 rolls, who uses the typical amount of paper 3 times a day, should survive for 53 days…39 days longer than the recommended 14-day quarantine for those with symptoms,” reported Reuters.
- Ingenious respirator solutions. Many companies developed respirator alternatives to fill the immediate need. One company, “…built a simple but effective ventilator from a windshield wiper motor and a pliable [hand-operated resuscitator],” reported Eric Haseltine in Psychology Today.
- Where’s Waldo’s fever? An artificial intelligence firm that creates tools to detect threats of violence revamped its analytics software so thermal cameras can measure the temperature of a person’s forehead and send out an alarm when a fever is detected.
- Gear James Bond’s ‘Q’ would have loved. A California company held a month-long contest, asking for practical devices for a COVID-19 world. Entries included “a wrist-mounted disinfectant sprayer, half gloves for knuckle-pushing of buttons and a device that lets you open car doors without touching the handle, aimed at cab users,” reported Reuters.
- Many are currently brainstorming and implementing changes to combat systemic issues of inequality brought to the forefront by the pandemic and other recent events.
Quarantining seems to have ignited individual creativity, crowdsourcing, and global thinking. Finding new ways to work together to solve issues may be the silver-lining as recognition that we are all in this together leads the way to prevent negative pandemic and domestic events.
THE INTERRELATED STRUCTURE OF REALITY
“Whatever affects one directly, affects all indirectly. I can never be what I ought to be until you are what you ought to be. This is the interrelated structure of reality.” - Martin Luther King Jr
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https://www.barrons.com/articles/why-the-jobs-report-isnt-quite-as-good-as-it-seems-51591407548?mod=hp_DAY_6 (or go to https://peakcontent.s3-us-west-2.amazonaws.com/+Peak+Commentary/06-08-20_Barrons-Why_the_Jobs_Report_Isnt_Quite_as_Good_as_It_Seems-Footnote_1.pdf)
https://www.washingtonpost.com/business/2020/06/05/unemployment-rate-wrong/ (or go to https://peakcontent.s3-us-west-2.amazonaws.com/+Peak+Commentary/06-08-20_TheWashingtonPost-Economists_Predicted_20_%_Unemployment_in_May-Footnote_5.pdf)