Market pulse: The economic swing brings hope for job recovery
The May jobs report makes one wonder how economists keep their jobs and why they are paid at all.
Economists expected a loss of 8.5 million jobs. A loss? The economy added 2.5 million jobs. You read that right. That is why economics is called “the dismal science.” It is not really a science at all. Still, some people, I among them, find economics very interesting.
We were told that nobody expected such a strong report. Not so fast. Last week I wrote, “The record job losses will soon turn into record job growth. That sounds better than it is. Over the last 10 years, the average monthly job growth was about 200,000. That will easily be surpassed as some of the temporarily laid off workers are rehired. Record hiring shouldn’t come as a surprise to anyone, but it will.” Okay, let me brag a little.
Many of the tens of millions of jobs that were lost in March and April are now being recovered as businesses open up. If you think the May report was good just wait until next month’s report. At a minimum it will be at least double the May hiring. That’s not even a bold prediction. That is what happens when more than 21 million people are temporarily laid off. Many get called back.
Meanwhile, the stock market rally continues. While investors continue to buy big-cap tech stocks the best performers now are small-caps and “value” stocks. That is a good sign. The rally is broadening.
What will it take to drive stocks lower?
Perhaps an almost euphoric conviction that problems are overblown, we’re on the road to recovery, there will soon be a vaccine, earnings will snap back and that stocks can only rise like trees growing to the sky. Such euphoria would be a typical sign that a bull market’s end was at hand. If it were so.
But it’s not so. Who is euphoric? Wall Street firms are not pounding the table for clients to buy stocks. Far from it. Viewers of CNBC or Fox Business would find scant reason to buy.
I have written many times that investors won’t wait for good news about a vaccine or an economic recovery. They will buy in anticipation and buy more with every report. That’s one reason the market has risen 42% since March 23. Another is one you’re probably tired of hearing — there is no alternative. There wasn’t and there isn’t.
David Vomund is an Incline Village-based Independent Investment Advisor. Information is found at http://www.VomundInvestments.com or by calling 775-832-8555. Clients hold the positions mentioned in this article. Past performance does not guarantee future results. Consult your financial advisor before purchasing any security.
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