Worst Jobs Report in History Still Discounts Grim Reality

This morning the government reported that 20.5 million Americans lost their job in April, erasing nearly all the jobs created over the last decade and bringing the unemployment rate to its highest level since the Great Depression.

The unemployment rate now stands at 14.7%, up from a 50-year low of 3.5% in February.  March’s rate was 4.4%. Markets have shrugged off the data as “old” and “expected.”  Indeed, all American stocks indexes opened well in the green this morning.  But we should not look to equity markets as a sign that today’s data is not as bad as it might seem.

The long-running adage that the stock market is not the economy has become even more evident over the past five weeks, and this morning is no different.  In reality, today’s jobs data is worse than the frightening headline reading.

As our Senior FX Strategist, Juan Perez, pointed out this morning, the data only captures the impact up until the week of April 12th.  It is almost a certainty that the jobs market has worsened over the subsequent weeks as many furloughed jobs have become layoffs.

Additionally, many who lost jobs in April were not counted in the unemployment rate because they did not seek another job while stuck at home. As a result, the proportion of working-age Americans who have a job fell to a record low of 51%.  The underemployment rate, which includes workers who want to work full time but cannot, rose 22.8%, up from 8.7%.

Some may be tempted to point at the sharp increase in average hourly earnings as a bright spot, but do not be fooled.  As Bloomberg pointed out, those figures are skewed higher by the excessive loss of low-wage workers from payrolls, not an increase in employee pay.  In the longer run, this will exacerbate the wealth gap.

Further breaking down the number, it becomes apparent that women and minorities are taking the hardest hit.  I could continue to beat a dead horse, but I think I will end by reiterating that there is no good news in today’s jobs data.  The dark reality is setting in that inactivity means precisely that: no one is actively working, and participation in this economy is very limited.

Tech and medical sectors may continue to see an uptick, but the simple truth is that a comprehensive economy will need the virus to be defeated and that a return to normalcy may include the application of other practices that could lend different business opportunities. As the globe copes, we believe other nations will have to continue helping their populations. Still, the American picture is the one that must improve soon to inspire the optimism and will be required to forge a recovery.

The buck’s fate in the next month may be guided by how others emerge as economies start to re-open with various degrees of restrictions. We also need some luck in this fight as we will begin a new phase of life in which we go out with some limitations. We foresee better things ahead as we confront and overcome the current trials to our health and well-being. It is inevitably going to be a function of coming together.

John Doyle VP, Trading & Dealing Tempus, Inc.

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