Market developments and recovery progress for May 8

A perspective from E*TRADE Capital Management, LLC 05/08/20

The latest market and economic developments:

  • Despite millions of additional jobless claims, stocks rallied Thursday and were higher in early trading Friday—even after April’s jobs report confirmed historic job losses in the US.
  • The US labor market lost 20.5 million jobs in April, sending the unemployment rate to 14.7%, the highest level of the post-World War II era.1 Although disheartening, these numbers were better than most analysts had predicted.
  • Driven largely by tech gains, the Nasdaq Composite erased its losses for the year, creeping into positive territory Thursday.
  • Another 3.2 million Americans filed for unemployment last week, bringing the seven-week total to roughly 33.5 million. While jobless claims remain in the millions, they have consistently slowed over the past five weeks.2

And here are the most recent updates on our path toward recovery:

  • Another round of stimulus for state and local governments may be in sight. The House of Representatives is reportedly working on legislation that includes $750 billion in aid for states as well as more direct support for individual Americans.3
  • Germany announced its second phase of reopening as new COVID-19 infections continue to decline. Schools, daycares, stores, and restaurants will be allowed to reopen in the coming days, followed by hotels at the end of the month—a promising step forward for Europe’s largest economy.4
  • After a four-month shutdown, Shanghai Disneyland sold out of tickets for its May 11 reopening within minutes, a positive sign that Chinese consumers are ready to open their wallets and resume life in public. Shanghai was the first of Disney’s parks to close amid the coronavirus outbreak and will be the first to reopen under additional social-distancing safety measures.5

Food for thought:

The coronavirus pandemic has shredded nearly every pocket of the global economy and financial markets—not the least of which is the US labor market, which was seemingly upended overnight. The April jobs report showed nearly a decade’s worth of job gains were wiped out in a matter of weeks, sending unemployment to its highest level since the Great Depression.

Yet the stock market appears to be brushing aside the historic blow. One reason for the divergence may be that jobs data is backward-looking, reflecting what could be a peak in layoffs amid the strictest lockdown measures, which have since begun to ease. Also, although two million Americans reported permanent job losses, the majority of the unemployed classified their situation as temporary and expect to resume work as the economy reopens.6

Although we have a long way to go, the good news in Friday’s report is that the top-line job-loss and unemployment numbers came in below estimates, which means the labor market may be faring slightly better than many people feared. 

Bottom line: Stay the course and keep investing decisions focused on individual timelines, long-term goals, and risk tolerance.

  1. CNBC, “A record 20.5 million jobs were lost in April as unemployment rate jumps to 14.7%,” 5/8/20, https://www.cnbc.com/2020/05/08/jobs-report-april-2020.html
  2. Bloomberg, “U.S. Jobless Claims Top 3 Million, With Little Relief in Sight,” 5/7/20, https://www.bloomberg.com/news/articles/2020-05-07/another-3-17-million-filed-for-u-s-jobless-benefits-last-week
  3. The Wall Street Journal, “House Democrats Close In on New Stimulus Proposal,” 5/7/20, https://www.wsj.com/articles/house-democrats-close-in-on-new-stimulus-proposal-11588851736
  4. The New York Times, “Germany, which showed the world how to mitigate a pandemic, has a hopeful message: We’re making progress.” 5/6/20, https://www.nytimes.com/2020/05/06/world/coronavirus-news.html?campaign_id=154&emc=edit_cb_20200506&instance_id=18271&nl=coronavirus-briefing&regi_id=76161369&segment_id=26756&te=1&user_id=5907a09bfb75dbf35537993d15f86005#link-4a73a809
  5. Bloomberg, “Shanghai Disneyland Tickets to Reopening Sell Out in Minutes,” 5/7/20, https://www.bloomberg.com/news/articles/2020-05-08/shanghai-disneyland-tickets-sold-out-in-minutes-for-reopening
  6. US Bureau of Labor Statistics, “Employment Situation Summary,” 5/8/20, https://www.bls.gov/news.release/empsit.nr0.htm

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