The Bureau of Labor Statistics released its job report this past week and while many knew it was going to be exceptionally bad, it is still shocking to read.
The BLS reported on Friday that total nonfarm payroll employment fell by 20.5 million jobs in April and the unemployment rate rose by 10.3% to 14.7%. This is the highest rate since the Great Depression when unemployment hit 25% and largest month-over-month increase since the government began tracking monthly numbers.
Regardless, stocks were up for the day. The S&P gained 1.67% with all eleven sectors positive. Home Depot, Boeing and Caterpillar led the Dow which increased 1.88% and the Nasdaq ended the week positive at 1.15%, recovering all its losses for 2020. The dollar edged slightly lower with oil prices gaining 5% and bond yields rising slightly.
The markets have not reacted negatively to the news because expectations are already built in. Many investors anticipated a terrible jobs report and if you exclude “temporary layoffs”, unemployment would not have risen since February. The big assumption is that these layoffs are exactly that… temporary. If things return to normal in a year, the hope is that long-term assets will be minimally affected.
We still lack detailed data on the reduction of hours for currently employed Americans. Similarly, there is not enough data to determine the cut in pay for those still employed. How this affects GDP in the future is yet to be seen and is largely dependent on continued stimulus from the Fed.
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