Market Minute - October 13, 2020

September employment data was released earlier this month showing that the economy continues to add jobs but at a slower pace.  According to the Bureau of Labor Statistics (BLS), nonfarm payroll employment increased by 661,000 last month with the unemployment rate coming in at 7.9%.  The headline number missed economists’ expectations of 800,000 but as we have seen throughout the pandemic, forecasting has been difficult with such large numbers moving in both directions.

The chart below from J.P. Morgan shows some employment data that I would like to discuss.

Jobb Lost 2020.png

Source: Bureau of Labor Statistics, J.P. Morgan Asset Management. Jobs lost from February 2020 to April 2020, job regained from April 2020 to present.

The chart on the left-hand side shows total employment over the past decade including the sharp drop witnessed this year.  As you can see, employment increased rapidly off the bottom but just shy of 50% of the jobs have been regained.  Clearly, there is a long road back to where we were prior to the pandemic.  The question remains how long it will take to see those jobs recovered, which will ultimately depend on the path of the virus and additional economic support.  The right side shows employment lost and regained this year broken down by industry.  As expected, those industries hit hardest by COVID-19 lost the most jobs.  Social distancing guidelines will make it difficult for those industries to fully recover until a vaccine is widely available.  Additional economic stimulus targeted towards those areas of the economy will be needed to prevent further and permanent damage.  Airlines, movie theaters, and restaurants all continue to struggle in the current environment. 

In a statement last week, Fed Chair Jay Powell made the case for additional economic support from Congress by saying the risks of additional economic stimulus are asymmetric.  The downside to no additional support would outweigh the risks of overdoing it.  Congress continues to negotiate terms of the package, but the timing and ultimate size of additional stimulus remain unclear, which could drive continued volatility.

 

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