As you have probably heard by now, the jobs report for May came in much better than expected. Analysts were expecting a LOSS of more than 8 million jobs and an INCREASE in the unemployment number to something close to 20%. The actual report instead showed an INCREASE of 2.5 million jobs and a DECREASE in the unemployment number to 13.3% (down from 14.7% in April). Not surprisingly the market is up sharply this morning.
An unemployment rate of over 13% is nothing to cheer about and can be a tremendous drag on the economy if that number does not come down substantially over the coming months. At the same time, today’s report and other data show that once states begin to reopen, people go back to work and demand for those things hardest hit (retail, restaurants, travel & leisure) is strong. Additionally, economists are seeing what one would hope to see – states that are “more open” are showing much stronger numbers than states that are “more closed.” For example, in the group of states furthest along in the re-opening, spending at restaurants has recovered to 70% of February levels, compared with 55% for states least opened. No one knows how long it takes for get back to 100% or actual growth, but data such as these suggest significant demand is waiting for the re-opening to progress across the country.
About a month ago, I wrote about a difference in stock performance across different kinds of companies since the March 23rd bottom. During the early parts of the market rebound, stocks that were benefiting from the shutdown – Netflix, Amazon, Walmart, and other such companies – were doing well, while travel, banking, and leisure stocks were still in the basement. Over the last week or so, we’re seeing a sharp rebound in those companies that were most beaten up – the banks, the airlines, Boeing, Disney, the cruise lines, and others. I heard the CEO of a cruise line say recently that bookings for the end of 2020 were approaching 2019 levels – pretty amazing! Oil has also rebounded – instead of trading well below $20 a barrel, today oil is trading around $40 a barrel, which is boosting energy companies. These stocks are still down for the year, but not nearly as much as a month ago.
I am not suggesting that we are out of the woods yet, but I continue to be encouraged that the market is behaving in ways consistent with what is happening in the corporate world. I am also encouraged that the strong economy we were enjoying in January and February has not been completely destroyed by the shutdowns.
I’m watching these and other data quite closely for more clues as to what we can expect going forward. But at least for today and this weekend, we can enjoy some welcome good news!
Cheers!
