• Market Crumbs

Job Losses, Markets Surge In April

Image via Markus Spiske on Unsplash

The coronavirus has shown how quickly things can go from good to bad. A few months ago, the unemployment rate was at a 50-year low of 3.5%, initial jobless claims hovered around 200,000 and less than 2 million Americans were collecting unemployment benefits.

The good news is the initial jobless claims data released yesterday showed jobless claims came in at the lowest level since March 21. According to the Labor Department, 3.84 million Americans filed for unemployment benefits last week.

The bad news is 3.84 million is still a significant number, as is the more than 30 million Americans who have filed for jobless benefits over the previous six weeks. The 30 million jobs lost represents nearly 20% of the U.S. working age population.

Continuing claims hit nearly 18 million last week, an increase of more than 2 million from the prior week. The four-week moving average jumped by 3.7 million to 13.3 million.

The effects on employment in the U.S. as a result of the coronavirus cannot be understated. The 30.3 million jobs lost over the last six weeks has now completely dwarfed the 22.4 million jobs created since the financial crisis. The job losses over the last month and a half are far greater than during the financial crisis, when 8.7 million jobs were lost.

Thanks to accommodative monetary policy, the forward looking stock market shrugged off the jobs data to log the best month in decades. The S&P 500 and the Dow Jones Industrial Average jumped 12.7% and 11.1%, respectively, marking their largest monthly percentage increases since January 1987. The Nasdaq gained 15.5% in April, its best month since June 2010.

For only the fifth time in history, the S&P 500 logged consecutive months with swings of 10% or more in opposite directions. The other instances were in 1931, 1933, 1938 and most recently, in September and October 1974.

Now all eyes will be on next week's April nonfarm payrolls report. This week Federal Reserve Chairman Jerome Powell warned the unemployment rate will likely hit "double-digits." If Powell is correct, the Fed has an excuse to continue expanding its balance sheet, which in turn should provide the most benefit to equity markets, rather than those who have lost their jobs.

Leftover Crumbs

  • Amazon gets blacklisted. The Trump administration has continued its assault on Amazon by blacklisting five of the company's foreign websites. The trade representative's office said the company's sites in the UK, Germany, France, India and Canada facilitated the sale of counterfeit and pirated products and have been added to the "notorious markets" register. "This purely political act is another example of the administration using the US government to advance a personal vendetta against Amazon," Amazon said.

  • Zoom mixed up words. Zoom has corrected language on its site that said it had 300 million daily active users. Zoom updated the statement to read it has 300 million daily meeting participants. The difference is a participant can be counted multiple times whereas a user cannot. "In a blog post on April 22, we unintentionally referred to these participants as 'users' and 'people.' When we realized this error, we adjusted the wording to 'participants.' This was a genuine oversight on our part," Zoom said.

  • Cryptos have a solid day. The market capitalization of the entire cryptocurrency market jumped more than $35 billion in a 24 hour period, according to CoinMarketCap.com. Bitcoin, the largest cryptocurrency, jumped nearly 20% over the period as it approached $9,5000 per bitcoin. It is believed that central bank policies and the upcoming bitcoin halving may be helping to push the market higher. Bitcoin halving takes place every four years, with large price increases following the event in previous years.

  • Juul prepares for layoffs. Juul is reportedly considering laying off 25% to 40% of its 3,000 employees. Juul, which has faced regulatory issues, has yet to determine the final number of employees it will lay off. The layoffs, which would be the first since 650 employees were laid off last year, could affect between 800 and 950 employees. "As part of our ongoing reset, we are constantly evaluating our operations and the best way to position our company for the long term," a Juul spokesperson said.

  • Shell cuts dividend. With oil prices having cratered this year, Royal Dutch Shell has decided to cut its dividend for the first time since World War II. The company is also suspending share buybacks and reducing oil and gas output by about a quarter. "We are living through a crisis of uncertainty," Shell CEO Ben van Beurden said. "If we had not cut the dividend ... we would have been left without options to reposition the company for the recovery and the future."