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Dang! The DJIA rose +3.15% today! And the reason why it surged is going to be the theme of today’s report. Buckle up! Let’s talk unemployment!

U.S. Unemployment Rate Fell to 13.3% in May
The US labor market snapped back to life in May, restoring a chunk of the jobs it lost in the first 2 months of the pandemic. After 2 whole months of brutal carnage, employers added +2.5 million jobs last month! The most added in a single month on records dating back to 1948. This lowers the jobless rate to 13.3% compared to April’s 14.7%.

With all of that being said, hurdles remain – including the prospect of a second virus outbreak, pandemic-related safety regulations and social unrest. Economists still expect a slow and choppy recovery though.

Let’s keep this topic rolling!

Stocks Close Sharply Higher on Surprisingly Upbeat Jobs Report
US stocks ripped higher Friday after expectations-defying data showed the country added +2.5 million jobs in May! The Dow Jones Industrial Average jumped more than 800 points, extending its gains for the week to +6.8% – the best week for the blue-chip index since April 9.

Investors have been betting that the country will be able to both contain the spread of COVID-19 and reopen businesses in the coming months. Many are pricing in a “V-shaped” recovery. The Labor Department said the US added +2.5 million jobs in May – a stunning gain, given economists surveyed by The Wall Street Journal had expected a loss of -8.3 million jobs instead (20% unemployment).

Shares of cyclical companies, whose profits are closely tied to the economy’s trajectory, helped lead Friday’s stock rally – Caterpillar rose +4.8%, Boeing rose +11%, and Bank of America rose +5%.

Now let’s move more into where unemployment didn’t improve..

Where Employment Improved—and Where It Didn’t

Among goods-producing industries, manufacturing showed strong gains. In the services category, jobs in food services and drinking places rose by +1.4 million, accounting for about half of the gain in total nonfarm employment. On the other hand, government payrolls continued to shrink as steep declines in revenue forced cities and states to lay off workers.

The unemployment rate ticked down in both sexes, with the rate still higher for women, who are over-represented in sectors such as education, leisure and hospitality. Those jobs were hit hard by social-distancing measures because they involve close personal contact.

For those of you who were furloughed or unemployed during the pandemic – are you back to work now? How do you see yourself fitting into these graphs? Let me know in the comments below!

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Responses

  1. let us just say the stock market will remain irrational longer than we can remain rational. what I suspect until evidence points otherwise. This is the effect of trillions of dollars and the fed backstopping the market. In normal circumstances, this(rising stock market in the middle of riots, looting, an election year, and pandemic) will be what we see in failing states think Venezuela or zimbabwe as extreme examples. The social contract is officially broken. The self-serving bias is at play in high finance. what is the unknown is the effect of retail investors flocking to the market. This is either 1 the greatest exit scam of the boomer generation or 2 a wealth transfer or 3. my increasing position a sucker’s rally before reality meets financial engineering’s mathematical techniques of artificial paper prosperity. The incoming spike in COVID cases I suspect will all but be the death knell of the market for the next 12 months. 2020 is canceled.

    1. Kimutai – I think it’s interesting you bring up these points. We’re on the same boat, that’s for sure. Things are beginning to feel oddly similar to December 2017 when Bitcoin was $20,000. It just isn’t adding up. Watch this YouTube video and share with me your thoughts if you have a moment – https://youtu.be/92wenJfjBDY

    2. I agree. Don’t fight the Fed. Their fast response to this economic
      downturn is unprecedented. They’ve normally waited months into a
      recession before stepping in a backstop the market. This correction
      was so sudden that they stepped in almost at day one. Market were on the brink of total financial collapse before the Fed stepped in and if they didn’t they we would be witnessing true societal collapse. The looting and riots would be ten times worse than what we are witnessing right now.

      A user on Reddit pointed out -> “In 1968, we had the Vietnam War, MLK Jr. was assassinated, civil
      unrest, presidential election, H3N2 virus, what did the S&P500 do?
      It broke an all time high 2 months after MLK Jr. was killed and civil
      unrest broke out and the S&P500 ended positive 10.8%.” Civil unrest is not new. There is always going to be a global calamity to talk about. 

      A second locked down quarantine this fall will be game over. I just don’t think it will happen. Government won’t mandate it knowing what we know today and how much damage was done this Spring. I do like some bitcoin as a hedge.

  2. Hey Austin, new member here. Nice to meet you.

    It appears that the unemployment numbers were fudged. They actually were worse than expected, but “misclassified.”

    “When the U.S. government’s official jobs report for May came out on Friday, it included a note at the bottom saying there had been a major “error” indicating that the unemployment rate likely should be higher than the widely reported 13.3 percent rate.

    The special note said that if this “misclassification error” had not occurred, the “overall unemployment rate would have been about 3 percentage points higher than reported,” meaning the unemployment rate would be about 16.3 percent for May.”

    Source: Washington Post
    https://www.washingtonpost.com/business/2020/06/05/may-2020-jobs-report-misclassification-error/

      1. Hard to say Garrett – it just isn’t adding up. Social unrest, unemployment, no vaccine, small businesses aren’t opening back up, personal saving hitting decade highs.. I’m skeptical.

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