Proponents of additional stimulus spending are petering out after Friday’s surprisingly positive employment report.
Total nonfarm employment numbers rose by 2.5 million in May, and the unemployment rate declined to 13.3%, the U.S. Bureau of Labor Statistics reported.
The improvements reflected “a limited resumption of economic activity that had been curtailed in March and April due to the coronavirus (COVID-19) pandemic and efforts to contain it.”
Specifically, employment rose sharply in leisure and hospitality, construction, education and health services, and retail trade. By contrast, employment in government continued to decline sharply.
Household data finds the unemployment rate declined by 1.4 percentage point, and the number of unemployed persons fell by 2.1 million to 21 million.
However, reflecting the effects of the coronavirus pandemic and efforts to contain it, the unemployment rate and the number of unemployed persons are still up by 9.8 percentage points and 15.2 million, respectively, since February.
Market reaction
The Dow rose 3.15%, or 829.16 points, to close at 27,110.98. The S&P 500 hit its highest level since late February and regained almost all it had lost in 2020, and the Nasdaq set a new all-time intraday high on Friday of 9,845.69.
The New York Times reported that, as a result, one Republican official texted “Goodbye phase 4” after jobs numbers were released, referring to additional stimulus checks. With Republicans reluctant before the jobs report’s release, the chances are increasingly unlikely.
On Sunday, Mohamed El-Erian, Allianz chief economic adviser, went so far as to call the May jobs report the “biggest positive data shock” in history.
El-Erian, former PIMCO CEO and co-chief investment officer who once managed Harvard’s endowment, told Fox News Sunday, “It’s some combination of an incredibly resilient economy bouncing back, the impact of government measures including the Paycheck Protection Program and finally, maybe some data distortion, so we can’t figure it out yet, but it certainly is good news.”
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
