The US Stock Market Continues to Disregard the Economy

The US Stock Market Continues to Disregard the Economy

$DIA $SPY $QQQ $RUTX $VXX

Here is a summary of this week’s Key messages:

The overall labor market situation remains awful. The numbers continue to set records, from the 7-wk total of 33.5-M jobless claims to 22.6-M in continuous claims. Behind these numbers is pain as illustrated by long lines at food banks across the country and reports of fear, mental anxiety and domestic violence.

The rate of labor force dislocation is moderating. The weekly 3-M jobless claims number is the lowest in the last 7 wks and less than 50% of the worst level.

The report highlights the urgent and important policy priorities of dealing with the implications of this shock to jobs and with ensuring that short-term problems do not become long-term ones that are harder to solve.

With markets focusing on the improvement in the “2nd derivative,” that is a reduction in the rate of labor force dislocation, US stocks rose. This widens the decoupling from the real economy and fuels debates on Wall Street Vs Main Street, companies Vs people and the well-off Vs the not well off. 

The Key questions looking ahead include, the following:

  • When do the jobs numbers stabilize?
  • How quickly do the unemployed go back to their jobs?
  • How many drop out and stay on the dole making more than they would working?
  • What about hourly wage rates?
  • What does the post C-19 coronavirus chaos labor force look like?

Friday’s NFPs report will provide some insight, answers to these Key questions will not come immediately.

It will be a process of assembling the data that is an important part of a 2X economic challenge: winning the war against a deep recession or depression plus getting back to inclusive, sustainable growth.

Have a healthy day, Keep the Faith!

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