In eight short weeks, the US employment situation went from first to worst. The US cruised into 2020, with an economy functioning better than any time since 1950 with all socio-economic classes benefiting. According to the Bureau of Labor (BLS), in February 2020, there were 159,759,000 civilians working representing an employed population of over 63%, an unemployment rate of 3.5%, and only 5,787,000 receiving unemployment benefits. The black swan of the coronavirus is not the virus, as societies have for centuries endured viral infections, but how many world governments, including the US, responded. Projections of two million coronavirus caused deaths by August in the US prompted government officials to mandate business closures and for people to stay home and not go to work.
Americans’ cooperation was remarkable and as of May 11, according to the Center for Disease Control and Prevention, the result in the US is 1,324,488 reported coronavirus cases and 79,756 related deaths, which is below formerly best case projections. The economic cost has been unprecedented that the administration and Federal Reserve are doing their best to supplement the financial loss. In the month of April, 22,369,000 people were added to the unemployed ranks pushing the total to over 33,000,000 people sitting idle waiting for the “green light” to return to work. If the below Nonfarm Payroll Change chart provided by Econoday were to scale, the March 2020 bar would be about 20% longer than the April bar, and the April bar would extend to nearly the bottom of the next page.
So why is the stock market so positive? Possibly, due to the confidence that America wants to get back to work. According to the BLS, 85% of the new applicants responded with a “Yes” answer to the question if they expect to be rehired by their employer. People are ready and willing to return to work especially since the generous CARES government unemployment subsidy ends July 25, 2020.
It is fascinating to observe the dynamics of anxious people sheltered in place for many weeks and politician’s unwillingness to ease restrictions due to projections of even greater health risks. Understandably, employers and politicians do not want to be responsible for a new possible outbreak of the virus even though all previous projections have yet to come to fruition. Unfortunately, there will always be some level of a viral health risk as viruses mutate almost as fast as new vaccines are introduced and why the common cold and influenza have yet to be cured. Scholars are now researching the issues of people’s Constitutional rights specifically civil liberties, privacy, and historical precedent. What are the terms to define a State of Emergency? How long can governmental officials enforce questionable restrictions on business operations, causing many to the point of bankruptcy, prevent people from socializing, or enjoy simple freedoms of going to dinner or walking in the park? The activities of consumers represent 66% of the US total commerce, and their ability to spend is obviously dependent on their employment.
So far, the stock market its continued positive trend since March 23 is indicating that all these complex issues of Constitutional rights along with business-friendly health preventions will be resolved and support renewing business activity sooner than later.
What Does This Mean To Me?
As agreeable as everyone was to stop one of the strongest American economies in its tracks, it appears the public and private sector are not as aligned in the restoring process. There are many mixed opinions about the future of what was “normal daily activity” and what will be the new restrictions to engage in these activities. Will we be required to wear masks in gatherings of 50 or more, hugs disallowed, our foreheads lasered with thermal temperature monitors, or GPS tracking of our whereabouts? Americans have a 100% success track record of recovering from a crisis whether economic, political, violence, or health related and more importantly a resiliency to adapt to new standards. After 9/11, travel became complicated with many restrictions to protect travelers from many forms of danger. Since 2001, we have learned to get through TSA quickly, officials introduced TSA ID’s for frequent travelers, and x-ray machines to quickly and accurately scan our luggage. The economy recovered from the horrific NYC attack so much so that the US experienced an economic crash seven years later, only to recover from that to start the longest running bull market in history. The stock market appears to be betting on the persistence, determination, and entrepreneurialism of the American people.
If you have any questions about your account or how to navigate through this difficult period, we welcome your call. We have navigated with our clients through October 19, 1987, Savings & Loan crash, Desert Storm, dot com bust, 9/11, and Great Recession (missed the Great Depression). We are happy to help you any way we can through this crisis.
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