Coming at the heels of a surprising May performance, the US economy showed tenacity as it beat analyst predictions once again. The Bureau of Labor Statistics yesterday reported that the US added 4.8 million non-farm payrolls to the job market in June. This is 1.8 million more jobs than expected. This shows unemployment rate decline to 11.1%.
Related Article: Trump Says Economy ‘Roaring Back’ in June As 4.8 Million Jobs Added
Us Generated 4.8 Million Jobs Last June, Unemployment Declines to 11.1%
The majority of new jobs came from the private sector. The hospitality and leisure industry led the way with 2.1 million payrolls or 44%. Restaurants and bars recorded the most gains in the industry, posting 1.5 million new jobs. Meanwhile, government jobs remain few, with only 33,000 new ones during the month.
The increase in jobs so pulled down the unemployment rate to 11.1% in June, which is 2.2% lower than last month’s rate of 13.3%. Meanwhile, April’s 14.7% unemployment rate was the highest since the Depression Era of the 1930s. The 11.1% is still a high number, considering that the previous highest unemployment rate since 1941 is 10.8% in 1982.
While the new jobs showed efforts to reopen the economy, the recent spike in coronavirus cases now threatens any further progress. In a Washington Post report, the US set a new record of single day coronavirus cases, posting 55,220 cases on July 2. Establishments that opened last June have started closing again as a precaution.
Unemployment Also Rises
The US also reported 1.4 million workers filing for unemployment benefits for the first time. This brings the total number of Americans filing for unemployment at least two weeks in a row up to 19.3 million.
The current government stimulus package (CARES Act), provides an extra $600 unemployment insurance. This provision expires by July 31, after which Congress will debate on new rules and amounts. This also allows even self-employed workers to file for claims. Regular unemployment benefits before the coronavirus pandemic remain in effect.
Bars and restaurants in particular, who accounted for 30% of the increase in jobs last June, are in danger of laying off workers again, as states are rethinking their strategy of reopening their economies. This could lead to re-closing open establishments and delaying the reopening of outlets about to open. Either way, the industry is still affected by the ongoing health crisis. Bureau of Labor Statistics Commissioner William Beach noted that “After two months of job gains…that sector is still down 3.1 million jobs since February.”
Mixed Reactions, Uncertainty for July
While the news garnered positive reactions from various sectors, there were causes for concern among analysts. Glassdoor Chief Economist Andres Chamberlain looks at the report as a sign of good things to come: “Today’s positive jobs report does provide a powerful signal of how swiftly US job growth can bounce back and how rapidly businesses can reopen once the nation finally brings the coronavirus under control — a reason for optimism in coming months.”
Some are fearing the worst is yet to come. The rising number of infections hampered economic recovery efforts. Businesses and state governments have begun reconsidering plans for their gradual reopening. The effects of the second wave on unemployment will most likely show up in the July and August reports. Michael Pearce, the senior US economist at Capital Economics, believes that a full job market recovery will be more difficult while the US remains in recession. The fresh outbreaks have hampered efforts to jumpstart economic activity as “we expect the recovery from here will be a lot bumpier and job gains to be more muted.”
Goldman Sachs analysts believe that over half the United States is now reconsidering their reopening plans and will bring back restrictions on public activities. They estimated that among the states, only Vermont and New Hampshire are safe to reopen.
Watch this video about Unemployment Rate in US last June:
In the fifth month of the outbreak, new infections keep sidetracking the US’s plans to reopen the economy. Despite the rising coronavirus cases, many Americans insist on going back to work. This explains the increasing numbers in the labor market.
Given the resurgence of the virus, do you think the economy will still be on the rise and unemployment rate will continue to decline? Let us know in the comments section below!
Republicans Ready To Finalize Stimulus Bill As Dems Continue To Squabble
Treasury Secretary Steve Mnuchin and White House Chief of Staff Mark Meadows met with House Speaker Nancy Pelosi and Senate Minority Leader Chuck Schumer on Saturday. This is a rare weekend session to try and break the stalemate between Republicans and Democrats over the next stimulus bill.
No deal was finalized. However, Mnuchin said he and Meadows were willing to meet with Democrats every day. This can go on until an agreement is reached.
The sticking point for Republicans is an unwillingness to extend the $600 per week unemployment benefit. They feel the amount needs to be pared down to a more reasonable $200 per week so that unemployed workers have a financial incentive to find work instead of making more money by remaining unemployed.
Unsurprisingly, Democrats want the $600 to be reinstated and have tied it to a host of other demands that have nothing to do with the pandemic, like their insistence on approving $1 trillion to be sent to state and local governments to fund budget shortfalls, food stamp increases, and assistance to renters and homeowners. Mnuchin said that’s “something we’re not going to do.”
Democrats Refuse to Agree
Mnuchin appeared on ABC’s “This Week” yesterday. There, he said the White House understands the need for extra unemployment benefits. However, he also says the Democrats are holding up the deal.
“The president is very concerned about the expiration of the unemployment insurance,” Mnuchin said, adding “We proposed a one-week extension at $600 so that, while we negotiate a longer term solution, at least all those people don’t lose their money. I’m surprised the Democrats won’t agree to that. They’re insistent on having a larger deal.”
He also said that Republicans aren’t willing to burden our country with more debt.
“There’s obviously a need to support workers, support the economy,” Mnuchin said. “On the other hand, we have to be careful about not piling on enormous amounts of debt.”
Until a Deal Is Made
He added that the White House supports a one-week extension of the $600 per week until a deal is struck. However, he believes $200 is a more appropriate amount for the extra weekly benefit.
“There are cases where people are overpaid,” Mnuchin said.
He did add that both sides agreed on the need for another $1200 stimulus payment for Americans, and that once approved, the checks could be in the mail within a week.
Both sides have agreed to meet daily until a deal is struck, and at least one Democrat sounds optimistic that a deal will be reached sooner rather than later.
“This was the longest meeting we’ve had and it was more productive than the other meetings,” said Schumer. “We’re not close yet, but it was a productive discussion — now each side knows where they’re at.”
Chief of Staff Meadows, however, doesn’t expect a deal is forthcoming. Appearing yesterday on CBS’s “Face The Nation,” Meadows said, “I’m not optimistic that there will be a solution in the very near term.”
Here’s Why The ‘Cockroach Portfolio’ Is Gaining Popularity
Ray Dalio, the founder of Bridgewater Capital, calls it the “all-weather portfolio” and it’s helped his investment management firm amass roughly $140 billion in assets.
Former Libertarian presidential candidate Harry Browne called it his “fail-safe investing” portfolio. Additionally, It just had its best three-month return ever. It returned 18%, far exceeding its average annual return of 7%.
Browne’s investing philosophy was that when times are good, stocks do well. Meanwhile, bad times are good for Treasury bonds, and gold does well during stagflation. Also, cash is king during a recession or crisis.
Since we don’t know what the future holds, Browne advocated for putting 25% of your portfolio into each asset class. He also suggests being prepared for whatever comes. With bonds, gold, and Treasury’s in your portfolio, you’ll underperform during a bull market. However, you can more than make up for it by softening the blow during a down market.
The “Cockroach” Portfolio
Back in 2012, Dylan Grice, a former strategist with SG Securities, called that type “the cockroach” portfolio. He dubbed it as such due to its ability to survive anything thrown at it.
“What I like best about cockroaches,” wrote Grice, “isn’t just their physical hardiness, it’s the simple algorithm they use to survive. According to Richard Bookstaber, that algorithm is ‘singularly simple and seemingly suboptimal: it moves in the opposite direction of gusts of wind that might signal an approaching predator.’ And that’s it. Simple, suboptimal, but spectacularly robust.”
Grice has calculated that for long-term investors, this type of portfolio has done at least as well as the traditional 60/40 stock and bond mix since the early 1970s. But most importantly, it managed to avoid any massive drawdowns.
And just like cockroaches, your first job is surviving as an investor, says Groce, while prospering is job number two.
A Similar Approach
Fortunately for investors who are looking for this type of portfolio, an ETF has recently launched that follows the same approach as the “cockroach” portfolio.
It’s called The Advanced Research Investment Solutions Risk Parity ETF (RPAR) and was launched last November. Alex Shahidi, the managing partner and co-chief investment officer, says they’re up to $620 million in assets so far.
He says the ETF has returned 12% so far this year compared to 1% for the S&P 500.
Most importantly, during the crash in March it fell just 15%, less than half of the drop in the S&P 500.
According to Shahidi, the fund is 25% stocks, 15% industrial commodities, 17.5% gold, 20% long-dated Treasury inflation-protected securities and 42% long-term Treasury bonds. Total exposure to the market is 120%, because the fund is 20% leveraged.
The stock mix is half U.S. and half overseas stocks, with the overseas portion tilted toward high volatility emerging markets.
Nobody knows what the market will do next, so Shahidi says you want to be prepared for any outcome. “You want to be diversified to (different) economic environments,” he added.
He did say that “If I had to pick an asset class for the next 10 years, it would be gold.”
How To Buy Gold For Your Investment Portfolio – Part 2
Yesterday was part one of buying gold and silver coins for your investment portfolio. With gold and silver both on a hot streak, investors are looking for the fastest way to gain exposure to and buy precious metals. You must be prudent and exercise caution so you don’t make a mistake and find yourself with a bad investment.
Do: Buy Gold With Your Savings
Don’t borrow money to buy gold. Use your savings so when you take possession of your gold, it’s yours without any claims against it. With volatile gold prices, you don’t want to be paying back a loan on your gold if the price suddenly dips.
Don’t: Buy Gold With Credit
The current financial system is built on fiat currency and debt with dollars being printed out of thin air. The reason to own gold is the opposite of that. So to purchase gold by using the system it is protecting against defeats the purpose of owning gold. Just use your savings and own your gold outright from day one.
Do: Store Coin Nearby
If a crisis hits and you need access to your gold, you don’t want to be out in public trying to retrieve your gold. So whether it’s in a small safe hidden in your house or buried in your yard, keep your gold nearby for easy access.
Don’t: Store Coins In a Safety Deposit Box
Storing your gold at a bank sounds like a safe decision. But it’s a bad idea for a few reasons. The first is that if there were ever a crisis, you have to go to the bank to retrieve your gold. That assumes the banks will be open during a crisis. Then you have to get access to your safety deposit box, retrieve your coins and safely get them home. That’s a lot of things that need to go right during a crisis. Additionally, gold has been confiscated before. Here in the US, gold was confiscated in 1933 under Franklin Roosevelt. If it were to happen again, gold stored at home, where there is no record if it, is much safer.
Do: Only Invest With Money You Don’t Need For Awhile
Nobody knows when inflation will hit, or the dollar will collapse, or when gold prices will finally take off. But we aren’t trying to time any of those occurrences. The reason to own gold is a long term store of value. So you don’t want to speculate in gold. We could see prices move higher or significantly lower. But long term, history has shown that gold prices steadily march higher as the dollar steadily declines in value. So when buying gold, make sure it’s with money that you don’t need in an emergency. We suggest using savings or other funds that you don’t need to worry about getting access to for at least five years.
If you have any more questions about investing in gold, find a reputable gold coin dealer near you. They will be glad to answer questions.
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