Last week’s employment report for April will go down in history but for all the wrong reasons. The report showed the magnitude of rapid job loss resulting from the pandemic. The monthly change in payrolls showed 20,500,000 jobs lost in April, following a loss of 870,000 jobs in March, as the unemployment rate rose from 4.4% to 14.7%. The change in average hourly earnings for the month was 4.7%, up 7.9% year over year. This change in earnings resulted from lower-wage jobs being impacted more severely. The historic decrease in jobs reflected in the report most likely still underestimates total job losses. It is very possible that the actual unemployment rate is over 20%.
The next few months will be critical to determining if the majority of job losses are temporary or permanent, as the economy tries to reopen in the U.S. and globally. At this point, roughly 80% of newly unemployed workers expect their jobs to return, but that number is subject to how quickly and effectively the economy reopens. The behavior of consumers, which represents 70% of gross domestic product, will also be critical to determining how much permanent damage has been done to the economy.
Markets will continue to seek an equilibrium between the profound impact on the real economy and the effect of tremendous monetary and fiscal stimulus. This process will lead to quick and severe sell-offs and rallies, and may produce other unusual market conditions like we saw with negative oil prices a few weeks back and negative fed fund futures last week.
This blog post is for informational use only. The views expressed are those of the author(s), and do not necessarily reflect the views of Penn Mutual Asset Management. This material is not intended to be relied upon as a forecast, research or investment advice, and it is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy.
Any statements about financial and company performance of The Penn Mutual Life Insurance Company or its insurance subsidiaries (each, “Client”) made by the author is provided with a written consent from the Client. Penn Mutual Asset Management is a wholly owned subsidiary of The Penn Mutual Life Insurance Company.
Opinions and statements of financial market trends that are based on current market conditions constitute judgment of the author and are subject to change without notice. The information and opinions contained in this material are derived from sources deemed to be reliable but should not be assumed to be accurate or complete. Statements that reflect projections or expectations of future financial or economic performance of the markets may be considered forward-looking statements. Actual results may differ significantly. Any forecasts contained in this material are based on various estimates and assumptions, and there can be no assurance that such estimates or assumptions will prove accurate.
Investing involves risk, including possible loss of principal. Past performance is no guarantee of future results. All information referenced in preparation of this material has been obtained from sources believed to be reliable, but accuracy and completeness are not guaranteed. There is no representation or warranty as to the accuracy of the information and Penn Mutual Asset Management shall have no liability for decisions based upon such information.
High-Yield bonds are subject to greater fluctuations in value and risk of loss of income and principal. Investing in higher yielding, lower rated corporate bonds have a greater risk of price fluctuations and loss of principal and income than U.S. Treasury bonds and bills. Government securities offer a higher degree of safety and are guaranteed as to the timely payment of principal and interest if held to maturity.
All trademarks are the property of their respective owners. This material may not be reproduced in whole or in part in any form, or referred to in any other publication, without express written permission.