The Week in Review: August 10, 2020
Jobs Number Beats Expectations; Growth Slows
There are many indicators that can be used to measure economic activity. Today, the number of jobs being generated is probably the most important.
On Friday, the U.S. Bureau of Labor Statistics (BLS) reported that nonfarm payrolls rose by 1.8 million in July. That exceeded the consensus estimate of 1.7 million (Econoday) but was below June’s 4.7 million increase. The unemployment rate fell from 11.1% in June to 10.2% in July.
Since the bottom in April, the number of jobs has increased by over 9 million, but we still have 13 million more jobs to go before getting back to pre-COVID levels.
The slightly better-than-expected report suggests that rehiring and reopenings are more than offsetting any slowdown in the recovery that may be happening due to July’s spike in COVID cases.
Damage to the labor market has been uneven as illustrated by the jobless rate based on one’s level of education, but the falling rate in all categories is cautiously encouraging.
Elsewhere, two closely followed economic indicators from the Institute of Supply Management (measures of manufacturing and services) accelerated in July, and weekly jobless claims fell to a pandemic low in the latest week (Dept of Labor).
While economic progress has been encouraging, the outlook is murky and remains largely dependent on getting COVID-19 under control.
Per The Wall Street Journal, a Federal Reserve Bank of St. Louis analysis found that states with a larger number of COVID infections since June saw the slowest job recoveries between early June and late July.
A Cornell University survey found that 31% of recalled workers had recently been laid off a second time, with most occurring in states without large virus surges.
Market action and the economy may also be dependent on another stimulus bill that is winding its way through Congress. Divisions have yet to be bridged, but both sides have indicated they expect a compromise to emerge.
Investor’s Corner
Stocks have performed well over the last month.
Positive news on a possible vaccine, rock-bottom interest rates, talk of new stimulus, and a slowdown in the number of new COVID cases (Johns Hopkins) have aided stocks.
Furthermore, the high degree of economic uncertainty is likely to keep the Fed from raising interest rates for a long time.
Market volatility can’t be ruled out, and new tensions between the U.S. and China have surfaced—but market action suggests we’ll see economic improvement over the next year, even if the path may be bumpy.
If you have any questions or concerns, feel free to reach out to me, Will, or Tyler.
Two for the Road
Starbucks, which controls 40% of the United States coffee market, will owe $1.25 billion in rent over the next year at its 16,000 company-owned stores. —Numlock News, July 30, 2020
When it comes to how much it takes to be considered wealthy, Americans now say it’s an average net worth of $2 million to achieve that status, down 23% from $2.6 million in January. When asked how much they would need to be comfortable, respondents said an average net worth of $655,000, down 30% from an average of $934,000 cited in January. —CNBC, July 27, 2020
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