Slowing Too Early?
Back in March 2020, we witnessed the worst hit to the United States economy in recent years, with the GDP decreasing by 34.3 percent and the unemployment rate spiking to 14.7 percent. This was due to the COVID-19 pandemic, which shattered the overheated economy to pieces. Ever since, the US has been working to mend it, with the pieces being the stock market and corporations, the labor market, interest rates, etc. So far, the recovery has been taking place, with the stock market roaring to new highs, the unemployment rate falling to 6.1 percent, and the GDP continuing to steadily grow. However, today’s focus is going to be on the labor market.
Every month, the US Bureau of Labor Statistics releases a job report highlighting how the labor market is doing, with statistics on the unemployment rate and how many jobs were added. The jobs report for April was released on Friday, and things didn’t look too good. The US was expected to add about 1 million jobs, and it completely missed the mark, adding only 260,000, leading to the unemployment rate rising from 6 percent to 6.1 percent. This was dubbed by many analysts as the worst jobs report of all time, but that might be going a bit too far.
The miss sparked a fierce debate about the unemployment benefits that have been given as critics say that it is doing nothing to help the economy, and businesses are citing it as a reason for not being able to find enough workers. However, the labor force is continuing to grow with 430,000 more people working or looking for work in April, which is a promising sign, and it proves that unemployment benefits aren’t the problem. Childcare is another problem as women are having to stay home to care for children with many daycares closed. This jobs report could push Biden to move forward with his four trillion-dollar infrastructure bill and childcare act, both of which plan to increase jobs, though many oppose those options also. The stock market’s reaction? You may be surprised, but the indices had an amazing day on Friday as the bad jobs report was good for the market. The logic is that the bad jobs report would cause the Fed to keep rates lower and financial conditions like what it is currently, which would help the markets move higher. As we’ve learned in the past year, the stock market is not the economy. What do you think about the jobs report?
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.