Despite another week of dismal unemployment data, stocks managed to close modestly higher yesterday.
The Dow Jones Industrial Average was down as much as 200 points on the bleak jobs data. However, it rallied over the course of the day and closed 33 points higher, or 0.1%. The S&P 500 gained 0.58% and the Nasdaq added 1.7%.
Netflix (Nasdaq: NFLX) gained 2.9% and Amazon (Nasdaq: AMZN) gained 4.36%. Investors continued buying shares in companies that are seeing increased demand due to the stay-at-home orders in place.
According to the Labor Department, the number of Americans filing for unemployment benefits totaled 5.245 million last week. That brings the four-week total to an astounding 22 million filings. This means roughly 15% of the pre-pandemic workforce has lost their job in the last month.
22 million is nearly the equal number of total nonfarm payroll jobs created since the Great Recession. Incredibly, the coronavirus pandemic has wiped out 11 years of job gains in just four weeks.
Next week’s report needs just 417,000 new initial jobless claims to officially have the number of jobs lost exceed the number of jobs created since the Great Recession. This feat, sadly, will be easy to accomplish given current economic conditions.
“With 22 million people now unemployed the question at hand is how much higher can this number go,” said Mike Loewengart, vice president of investment strategy at E-Trade. “Today’s jobless claims still firmly indicate the fragility of the labor market.”
Seema Shah, chief strategist at Principal Global Investors, added “While today’s jobless numbers are down on last week, they still mean that all the job gains since the financial crisis have been erased. What’s more, with many workers, including those in the gig economy, not included in these numbers, labor market pains may be even worse than these numbers suggest.”
Is the Worst Over?
Despite such dismal numbers, the market still managed to close in positive territory. Chris Rupkey, chief financial economist at MUFG, says it’s the market reacting to a smaller increase. He mentioned that this doesn’t necessarily signal that more job losses is good news.
“The stock market seems to count job layoffs the same way they read the curve of new positive coronavirus cases and think that 5.245 million jobless claims this week is better and lower than the 6.615 million applications last week.”
He added “We hope stock market investors are right that the peak in layoffs each week means the worst is over, but somehow it seems irrelevant how fast the layoffs are coming as long as they are coming. And more job layoffs are coming.”
Diane Swonk, chief economist at Grant Thornton, says the small business loans from the Treasury should start helping bring down the unemployment numbers soon.
“It’s not exactly good news when the pain is compounding but it should be peaking. We are going to be disbursing 1.3 million plus small business loans. They have to start using that money within 10 days, which means we’ll people brought back on the payrolls in May and June.”