The Stock Market is Not the Economy

[oneill225]

However there's no indication 'most' are going back to work yet. Over 20M still out of work and many working with pay cut. About 50% of households have lower income than Feb, which could trigger a secondary downward spiral not realized yet. And a (safe) vaccine is very unlikely within a couple years however some form of treatment that significantly reduces deaths is more likely.

Not saying what will happen but am saying literally no one does know and is being foolish if they claim they do. Pay attention to consumer confidence as one factor (not the factor).

Most are back to work. We are a country of 300+ million. Even the strip mall type businesses are now reopening. Dozens of states have been largely open for a month, now. Shut downs will not be used, again, unless hospitals become overwhelmed and that is not happening. We have learned to live with the virus and the risks.

The stock market is a leading indicator and the employment numbers are a lagging indicator. Consumer confidence is not particularly useful during times of confusion and unrest, so it is a worthless indicator, right now.

Anecdotally, where I live (Washington state), traffic is back to normal and shopping trips are met with the pre-corona crowds. We are technically still in shut-down mode, but businesses are restarting, anyway.

There are several big cities that are still hurting due to the lack of tourism, restaurants and poor leadership, but the American economy is much wider and deeper than those enclaves.

Just a prediction, not a claim to certainty, but the market should trade side-ways with smaller moves up and down until the vaccine is announced towards the end of the year.

 

[target2019]

However there's no indication 'most' are going back to work yet. Over 20M still out of work and many working with pay cut. About 50% of households have lower income than Feb, which could trigger a secondary downward spiral not realized yet. And a (safe) vaccine is very unlikely within a couple years however some form of treatment that significantly reduces deaths is more likely.

Not saying what will happen but am saying literally no one does know and is being foolish if they claim they do. Pay attention to consumer confidence as one factor (not the factor).

Your post is factual and a good response. Thanks for posting.

 

[JustVisitingThisPlanet]

Unemployed in thousands. The real unemployed may be 25M+ end of May because many left the labor force after losing job so are no longer counted as unemployed. About 164M were in labor force in Feb, it's down to about 158M end of May. So many left labor force, not counted as unemployed.

https://data.bls.gov/cgi-bin/surveymost?ln

Nearly half of US households have experienced a loss of income in some form, as job loss or pay cut. This may get worse when $600 unemployment boost ends. And for next year or so, employers may have the upper hand in salary/wage negotiations.

Consumer confidence is improving a bit for now but doesn't mean trend will continue...

 

[Sunset]

Most are back to work. We are a country of 300+ million. Even the strip mall type businesses are now reopening. Dozens of states have been largely open for a month, now. Shut downs will not be used, again, unless hospitals become overwhelmed and that is not happening. We have learned to live with the virus and the risks.

The stock market is a leading indicator and the employment numbers are a lagging indicator. Consumer confidence is not particularly useful during times of confusion and unrest, so it is a worthless indicator, right now.

Anecdotally, where I live (Washington state), traffic is back to normal and shopping trips are met with the pre-corona crowds. We are technically still in shut-down mode, but businesses are restarting, anyway.

There are several big cities that are still hurting due to the lack of tourism, restaurants and poor leadership, but the American economy is much wider and deeper than those enclaves.

Just a prediction, not a claim to certainty, but the market should trade side-ways with smaller moves up and down until the vaccine is announced towards the end of the year.

Certainly a positive view, especially ignoring consumer confidence.

I don't see it so positive, as I'm guessing there will be a big spike in cases and deaths (at over 116,000 deaths now) as all States open back up.
However I don't see much of a return to lockdown, as people need to learn to live with the Covid-19 (masks, distance, washing, etc).

I don't see big cities as enclaves, I see them as holding a large portion of the GDP.

 

[JustVisitingThisPlanet]

Various potential Employment scenarios as of end of May, not limited to these...

I put this together based on BLS employment data (up to May 31) and projections from wide range of economists from various schools of thought.

 

[oneill225]

Unemployed in thousands. The real unemployed may be 25M+ end of May because many left the labor force after losing job so are no longer counted as unemployed. About 164M were in labor force in Feb, it's down to about 158M end of May. So many left labor force, not counted as unemployed.

https://data.bls.gov/cgi-bin/surveymost?ln

Nearly half of US households have experienced a loss of income in some form, as job loss or pay cut. This may get worse when $600 unemployment boost ends. And for next year or so, employers may have the upper hand in salary/wage negotiations.

Consumer confidence is improving a bit for now but doesn't mean trend will continue...

Even 30 million unemployed would amount to less than 10 percent of the US population. Most Americans have returned to work; if they stopped working, at all. I agree that the economy took a big hit over the past few months, but as to the question of how the stock market reflects the economy, I think it is a much better indicator than backward looking employment numbers following a self-imposed shut-down.

Americans are going back to work in ever increasing numbers. This is not disputable in my opinion. Using your statistics, above, most households (more than half) did not even experience a "loss of income in some form, as job loss or pay cut". I have also read that savings rates are up, as well. We are still waiting on a vaccine, but once it is available, all of this will be in the rear view mirror. I think the stock market has it right going forward.

 

[pb4uski]

Most are back to work. We are a country of 300+ million. Even the strip mall type businesses are now reopening. Dozens of states have been largely open for a month, now. Shut downs will not be used, again, unless hospitals become overwhelmed and that is not happening. We have learned to live with the virus and the risks.

The stock market is a leading indicator and the employment numbers are a lagging indicator. Consumer confidence is not particularly useful during times of confusion and unrest, so it is a worthless indicator, right now.

Anecdotally, where I live (Washington state), traffic is back to normal and shopping trips are met with the pre-corona crowds. We are technically still in shut-down mode, but businesses are restarting, anyway.

There are several big cities that are still hurting due to the lack of tourism, restaurants and poor leadership, but the American economy is much wider and deeper than those enclaves.

Just a prediction, not a claim to certainty, but the market should trade side-ways with smaller moves up and down until the vaccine is announced towards the end of the year.

Proof that the line between optimism and delusion can sometimes be very thin. [emoji3]

 

[MichaelB]

Various potential Employment scenarios as of end of May, not limited to these...

If you’re going to post charts copied from another source you need to provide attribution.

 

[oneill225]

Certainly a positive view, especially ignoring consumer confidence.

I don't see it so positive, as I'm guessing there will be a big spike in cases and deaths (at over 116,000 deaths now) as all States open back up.
However I don't see much of a return to lockdown, as people need to learn to live with the Covid-19 (masks, distance, washing, etc).

I don't see big cities as enclaves, I see them as holding a large portion of the GDP.

No doubt that big cities are a large part of the GDP, but aside from tourism and service related businesses, much of the economic activity in our big cities has continued remotely from home. Financial services, for example. I have a friend who is a buyer for Boeing. He has simply worked from home during the shut-downs.

Many businesses never shut-down or actually grew during the past few months. The fact is that the shut-down crisis affected each state and county very differently. The stock market considers the whole economy, not just a handful of struggling cities. Looking backward at the short-term carnage following a crisis is a very weak indicator of our future pulling out of the crisis.

 

[Aerides]

Most Americans have returned to work; if they stopped working, at all.

Sorry I'm confused, are you trying to make the case that "most" of those who lost their jobs in the shutdown have now returned to full employment?

Or simply that most of the workforce is working...which is very very different.

 

[oneill225]

Sorry I'm confused, are you trying to make the case that "most" of those who lost their jobs in the shutdown have now returned to full employment?

Or simply that most of the workforce is working...which is very very different.

I am referring to the total US workforce. Why limit a discussion about the strength of the American economy (relative to the stock market gains) to weeks-old, temporary unemployment numbers? I think the stock market reflects the big picture going forward.

 

[Aerides]

I am referring to the total US workforce. Why limit a discussion about the strength of the American economy (relative to the stock market gains) to weeks-old, temporary unemployment numbers? I think the stock market reflects the big picture going forward.

I don't think anyone is trying to limit the discussion, but to brush aside lifetime record unemployment data as a non factor seems to be a tad optimistic IMO.

Most of the (still) unemployed might be that way for a while. A lot of small businesses aren't reopening. Those that are have scaled back in a lot of places, or are phasing in reopening.

 

[JustVisitingThisPlanet]

If you’re going to post charts copied from another source you need to provide attribution.

I put that one together based on BLS data and wide range of economist comments from different schools of analysis, hence broad spectrum. Have updated that post noting that.

 

[oneill225]

I don't think anyone is trying to limit the discussion, but to brush aside lifetime record unemployment data as a non factor seems to be a tad optimistic IMO.

Most of the (still) unemployed might be that way for a while. A lot of small businesses aren't reopening. Those that are have scaled back in a lot of places, or are phasing in reopening.

Time will tell. The last employment report supports what I am saying and so does the stock market. This is not a typical recession and it will not recover like a typical recession. So far, a "V" shaped recovery is still in the works for the economy and the employment numbers just as we have seen in the markets.

Few predicted the last employment numbers. Employment models that may have been reliable during past recessions are failing, now. I think predictions of a long, slow recovery will also fail going forward. Why would anyone think these models are credible after the last report?

Not that I am a fan of putting our kids in debt, but trillions of $ have been pumped into the economy and much of it has still not been utilized. There is bipartisan talk of a big infrastructure stimulus, as well. We have low inflation and low borrowing costs. Banks are strong and the administration is cutting regulations and barriers to business. A vaccine is only months away and our hospitals are ready for any second wave that may arise. If I were a betting man, I would say our economic upside is beating the downside by a large margin.

 

[JJpop]

Source? Unemployment is ~20%ish, and reportedly 2/3 of people on unemployment compensation are making more than when they were working.

And many will no longer have a job and benefits will soon be gone.

 

[target2019]

Most are back to work. We are a country of 300+ million. Even the strip mall type businesses are now reopening. Dozens of states have been largely open for a month, now. Shut downs will not be used, again, unless hospitals become overwhelmed and that is not happening. We have learned to live with the virus and the risks.

The stock market is a leading indicator and the employment numbers are a lagging indicator. Consumer confidence is not particularly useful during times of confusion and unrest, so it is a worthless indicator, right now.

Anecdotally, where I live (Washington state), traffic is back to normal and shopping trips are met with the pre-corona crowds. We are technically still in shut-down mode, but businesses are restarting, anyway.

There are several big cities that are still hurting due to the lack of tourism, restaurants and poor leadership, but the American economy is much wider and deeper than those enclaves.

Just a prediction, not a claim to certainty, but the market should trade side-ways with smaller moves up and down until the vaccine is announced towards the end of the year.

I've tried to understand your statement, "most are back to work." I'm also confused by your mention of 300+ million. The labor force is much smaller than that number.

 

[oneill225]

I've tried to understand your statement, "most are back to work." I'm also confused by your mention of 300+ million. The labor force is much smaller than that number.

"Most" is more than 50 percent, so most of the total labor force is back to work and more are joining them daily.

 

[JJpop]

Time will tell. The last employment report supports what I am saying and so does the stock market. This is not a typical recession and it will not recover like a typical recession. So far, a "V" shaped recovery is still in the works for the economy and the employment numbers just as we have seen in the markets.

Few predicted the last employment numbers. Employment models that may have been reliable during past recessions are failing, now. I think predictions of a long, slow recovery will also fail going forward. Why would anyone think these models are credible after the last report?

Not that I am a fan of putting our kids in debt, but trillions of $ have been pumped into the economy and much of it has still not been utilized. There is bipartisan talk of a big infrastructure stimulus, as well. We have low inflation and low borrowing costs. Banks are strong and the administration is cutting regulations and barriers to business. A vaccine is only months away and our hospitals are ready for any second wave that may arise. If I were a betting man, I would say our economic upside is beating the downside by a large margin.

I am glad to know a vaccine is months away. How many months is months 4? 6? 12? 18? How effective will any vaccine be? Like the flu shot? Hospitals are ready? SOME hospitals are ready. I have been hearing about an infrastructure bill for almost 4 years since our esteemed occupant of the WH promised it as a foundation piece of his campaign. Probably one of the few things that could actually get through the mess in DC but for reasons that are truly baffling, nothing as usual.

 

[MichaelB]

I put that one together based on BLS data and wide range of economist comments from different schools of analysis, hence broad spectrum. Have updated that post noting that.

Thank you,

 

[oneill225]

I am glad to know a vaccine is months away. How many months is months 4? 6? 12? 18? How effective will any vaccine be? Like the flu shot? Hospitals are ready? SOME hospitals are ready. I have been hearing about an infrastructure bill for almost 4 years since our esteemed occupant of the WH promised it as a foundation piece of his campaign. Probably one of the few things that could actually get through the mess in DC but for reasons that are truly baffling, nothing as usual.

Well, at least we can agree that there is lots of stimulus money out there and that we have low inflation and borrowing costs. Progress.

 

[JJpop]

Well, at least we can agree that there is lots of stimulus money out there and that we have low inflation and borrowing costs. Progress.

Yes to a point. The problem is the thousands of small businesses that are not getting the money.
The other problem is that I find it totally reprehensible that the WH will not release info to congress exactly where that 500 million went. Who got what? The congress has no right to know? We have no right to know?
When they withhold info it is because they do not want you to know.
With all the jobs lost, I simply cannot imagine why there is not a HUGE,HUGE, national infrastructure bill. Not some token bill. A country changing bill.

 

[pb4uski]

"Most" is more than 50 percent, so most of the total labor force is back to work and more are joining them daily.

Are you suggesting that more than 50% of people who lost their jobs in the last few months are now back to work? If so, I call BS.

That would mean an unemployment rate of 11% rather than 16% (peaked at 19% in April vs 3% low),

 

[oneill225]

If you are talking about the 500 (really 800) billion for PPP, it went to banks to be loaned out to small businesses. All of the recipients should be identifiable. Tough to keep that secret even if nefarious politicians wanted to.

 

[pb4uski]

.... With all the jobs lost, I simply cannot imagine why there is not a HUGE,HUGE, national infrastructure bill. Not some token bill. A country changing bill.

+1. If we're going to spend that much money via more deficit spending then let's at least end up with something to show for it like new roads and bridges rather than pissing it away.

Agree with why this hasn't already happened being a mystery... it seems all sides are ostensibly in favor if it... or at least so they say.

 

[oneill225]

Are you suggesting that more than 50% of people who lost their jobs in the last few months are now back to work? If so, I call BS.

That would mean an unemployment rate of 11% rather than 16% (peaked at 19% in April vs 3% low),

No. I am referring to the total labor force, as stated. I am also referring to the total economy and total stock market.