Economic Commentary: The Jobs Picture

We knew it was going to be ugly and it was. Along with other negative records our economy is sure to break, the unemployment rate rose to 14.7% last month, as the economy lost 20.5 million jobs. Just to put this in perspective, the number of jobs lost wipes out the jobs added for the past seven years. All in one month. This is the state of our “light switch” recession, which means the economy was turned off like a light switch. Our rate of unemployment is now the highest since the Great Depression.

While the numbers were as expected, they are no less painful, and they lead us to this question — why has the stock market been so buoyant recently? There have been many debates about the markets being a predictor of future economic activity. Could it be that stocks are predicting a quick end to this economic malaise? That certainly is a possibility. There is also a possibility that economic stimuli in the form of near-zero interest rates and trillions of dollars are making the stock market look attractive when there are few other investment options.

The answer to these questions will not come until we know how long it will take to turn the economic light switch back on. Certainly, with economic growth down almost 5.0% in the first quarter, there will be a big hole to dig out of. While some states are opening, everyone is still watching the curve of COVID-19 very closely. It is almost like watching box scores of baseball games on a daily basis. The curve will tell us how long the switch will take to turn on. Then, the next questions will be–will there be another round of COVID-19 to deal with next winter and will we have a vaccine and/or effective drugs by then?

Source: Financial Pro