Saturday, September 30, 2023
Courthouse News Service
Saturday, September 30, 2023 | Back issues
Courthouse News Service Courthouse News Service

Dow Gets 800-Point Surge, Nasdaq Nearly at February High

A stunning jobs report gave Wall Street a much-needed adrenaline shot heading into the weekend, as markets boomed upward.

MANHATTAN (CN) — A stunning jobs report gave Wall Street a much-needed adrenaline shot heading into the weekend, as markets boomed upward.

By the closing bell on Friday, the Dow Jones Industrial Average had jumped more than 800 points, a 3.15% increase for the day. The Dow still has 2,400 points to reach its nadir on February 19. 

The Nasdaq, which closed at 9,814 points, is now at nearly the same spot it stood at its high point in February. The S&P 500 gained about 2.6% for the day, still almost 200 points shy of its high point earlier this year. 

The rally began before markets opened when the Bureau of Labor Statistics reported that nonfarm jobs actually rose by 2.5 million last month. The unemployment rate fell to 13.3%, BLS said, a far cry from the 20% or higher that many experts — including Federal Reserve banks in Minneapolis and St. Louis, as well as the Congressional Budget Office — had predicted.

The uptick in jobs was due mostly to a sharp increase in several hard-hit sectors. For instance, the retail industry, which had lost 2.3 million jobs in April and has been rocked by several high-profile bankruptcies, gained back 368,000 of those jobs last month. The only sector to continue to hemorrhage jobs was in government, which lost 585,000 jobs in May on top of the 963,000 jobs lost in April.

President Trump took a victory lap over the report, first firing out several rapid fire tweets and then saying during a mid-morning press conference that the report marked the beginning of a great economic comeback.

“We’re bringing jobs back,” Trump said during the nearly one-hour-long speech, which rambled at times to muse about driving a trailer with the first lady and later speculating that George Floyd was “looking down” on how great a day it was for America. 

“I think we’re actually going to be back higher next year than ever before” said Trump, predicting the economy will rebound quickly as a V-shaped recovery instead of a prolonged U-shape or swoosh-shape. “We’ve been talking about the V. This is better than a V, this is a rocket ship. This is far better than a V.”

In a speech later in the day, former Vice President Joe Biden lambasted Trump for essentially hanging a “Mission Accomplished” banner across the economy, despite record-high unemployment and unabated increases in Latino and African-American jobless rates in May.

“Donald Trump still doesn’t get it,” Biden said. “He’s out there spiking the ball, completely oblivious to the tens of millions of people who are facing the greatest struggle of their lives.”

Most market-watchers were flabbergasted by the report, but they also cautioned it did not necessarily represent a complete economic turning point.

In a statement, U.S. Chamber of Commerce Executive Vice President Neil Bradley warned that, while the jobs report was “a clear sign that the reopening and recovery is underway,” it is also “a reminder that the recovery is likely to be uneven across industries and communities.”

Bradley, like Biden, noted the discrepancy among African-American employment. “If black Americans had the same participation and unemployment rate as white Americans, there would be 1.3 million more African-Americans in jobs today,” he said.

Some credited the uptick in jobs to the Paycheck Protection Act, which paid small businesses millions of dollars to keep workers on the payroll, even when they were not working.

“This could be a manifestation of the short-term success of the PPP,” said Michael Pagano, a finance professor at Villanova University. “It was a wild card. I don’t think people realized how effective the PPP was.” 

President Trump today signed into law changes to the PPP that grant an additional 24-week window to small businesses to use their loans, as well as lowered the threshold on how much of the money must be spent on payroll. 

“There is greater than usual uncertainty surrounding these data,” Stephanie Aaronson, a senior fellow at Brookings Institute, wrote in an email.

She also noted the vast difference between the BLS report and the weekly unemployment claims, such as payroll company ADP reporting on Wednesday that 2.7 million jobs were lost last month. “The discrepancy is particularly noteworthy.”

Peter Boockvar, chief investment officer at Bleakley Advisory Group, noted a truer picture of unemployment could be found in one of the report’s appendices, which counts workers who had stopped looking for jobs or whose hours were pared back. That number still hovers at 21.2 million, compared with 22.8 million in April. 

Researchers at the Peterson Institute for International Economics also said a more realistic unemployment rate — which includes reclassifying those not in the labor force as unemployed — likely hovers around 17.1%

The BLS itself included several caveats in its report. It noted that the response rate was about 15% lower than usual due to the Covid-19 pandemic. The agency also predicted the unemployment rate would be 3 percentage points higher, at 16.3%, if survey respondents had correctly classified employees who were “absent from work due to ‘other reasons’” as unemployed.

Such workers should have been classified as “unemployed on temporary layoff.” The agency said it was investigating why the misclassification, which was also noted in the April jobs report, continues to occur. 

“It’s very noisy data,” Pagano said, adding that, while the report is good news, a second wave of Covid-19 infections or a wave of bankruptcies could again lead to dire unemployment data.

“It’s clearly early innings” on the economy, he said, likening previous reports to “a really good baseball team beating up on a weaker team” and this report to a rain delay, temporarily suspending the slaughter. “In theory, the economy could come back fairly robustly,” Pagano said. “I’m somewhat skeptical it will be that easy, though.”

Future success may depend highly on a similar rebound in consumer spending, which accounts for nearly three-fourths of the U.S. economy. 

“The unemployment rate is still higher than it was at any point in the Great Recession and the labor force participation rate is lower,” Aaronson said. “Future progress will depend on how the pandemic progresses, whether consumers feel comfortable in resuming some activities and spending, and whether state and local government finances recover, among other factors.”

Follow @NickRummell
Categories / Economy, Financial, National, Securities

Read the Top 8

Sign up for the Top 8, a roundup of the day's top stories delivered directly to your inbox Monday through Friday.