Rough Unemployment Numbers
On Friday, the DLS reported that a little over 20 million Americans lost their jobs month over month for the month of April. That is the worst job loss on records which pushed unemployment rates north of 14%. What was interesting is, part of that 20 million, roughly 17 million, believe that they will be rehired. What is important about that number is that the VLS number for the month is backward-looking and it’s delayed by a few weeks. Each Thursday we get the unemployment data that shows the number of new claims filing for unemployment. That’s more of an accurate assessment of where things stand. Of those 17 million people who believe they will be rehired, if they are truly being rehired as we start the reopening process, we should see that on the unemployment claims on Thursdays and those numbers should start to drop. We’ve tens of hundreds of billions of dollars on PPP to give businesses funding to rehire employees and two layers of that have been put into place. We are now opening state economies so, this week’s job information is extremely pivotal because it should reflect the positive moves that have been made. If we see that number stays stubbornly high, that that’s probably a bad indicator that these 17 million people believe they’re going to be rehired and are not. There are certain businesses that will just never come back and with that, you will have people believe that there’ll be rehired, but the company isn’t there anymore. This Thursday’s number will be possibly the most important to watch and how the market reacts to it. This will have a huge impact on people’s portfolios that are invested in the equity markets and fixed income markets across the board. Is this reopening going smoothly? How is it working? Are people actually being rehired? These are things to watch. We’ve also seen consumer sentiment expectations stay higher which may be reflected in the fact that most people think they will be rehired. If people believe they’re just temporary off out of work, the sentiment really shouldn’t drop as much. If those people start to realize that they are not going to be rehired, you could see a wave of negative sentiment in this country.
We will start following the success of the economic data and the economy reopening very closely here. The good news is that the states with declining Coronavirus cases now make up 72% of U.S. GDP. We are watching a couple of things. Will states reopen without a second wave? Over the weekend, South Korea started reopening and saw a spike in their cases. Also, previously mentioned, will the furloughed workers be rehired now that the economy is coming back? An interesting fact to watch here is that 94% of Americans live in a state that’s going to be reopened by the end of the month. The success of the market will greatly depend on the success of the reopening. As these economic reports start coming out, we’ll be analyzing these very carefully and make sure to keep you informed because all of these things will have a big impact on the market.
The Main Street Lending Program
We have talked a lot about the Payroll Protection Program, but we wanted to talk about a program that you may not have heard as much about since PPP has been the focus in the media. The Main Street Lending Program has $600 billion in funding from the Federal Reserve. This program is aimed at employment. What’s great about that for your portfolio is that more public companies can participate in it. The protection program on the second round worked a lot more efficiently so the federal reserve has come in with yet another approach. At first, we added the Payroll Protection Program and it was really the only main stimulus. Now we have two. We still have the PPP and on top of that, the Fed has added this Main Street Program with the fed.
With all the data and the research that we’ve looked at, one of the most important is corporate guidance. Corporate guidance gives us a better, overall picture of public traded companies and where they are headed and where they stand currently. This data could give us an indicator for the next couple of months and the next couple of quarters. Another reason we look at corporate data is that it shows how the consumer will react. Will the consumer come back into the markets and start to buy? Consumption is 67% of GDP so that is important to keep in mind and it might give us clarity of what the future will hold. As we track publicly traded companies on their earnings as well as consumers supporting this economy with confidence, we will continue to keep you up to date.
Fi Plan Partners is an independent investment firm in Birmingham, AL, serving clients across the nation through financial planning, wealth management and business consulting. Fi Plan Partners creates strategies in the best interest of their clients using both fee based investing and transactional investing.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
Economic forecasts set forth in this presentation may not develop as predicted.
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