Another positive jobs report did not spark a rally on Wall Street, as investors closed out the week before July 4 with only moderate gains.
MANHATTAN (CN) — Despite fireworks during the early morning hours of trading, another positive report on Thursday did little to inflame Wall Street’s bullish side.
In its monthly jobs report for June, the Bureau of Labor Statistics reported that the U.S. economy added 4.8 million jobs, cutting the unemployment rate to just above 11%.
Unlike the huge rally that followed last month’s surprising May jobs report, investors did not have an overly bullish reaction. A day earlier, they also reacted with tepid optimism to ADP’s good-looking numbers on jobs.
Overall the markets have had a good week, but on Thursday the Dow Jones Industrial Average gained only 93 points, a 0.3% increase for the day. The S&P 500 and Nasdaq both gained about 0.5%, with the latter setting a new high mark at 10,207 points.
President Trump, who took a victory lap last month after the surprising May jobs report, happily lauded Thursday’s data as “spectacular news” for Americans. “Today’s announcement proves that our economy is roaring back, it’s coming back extremely strong,” the president said during an impromptu press briefing.
Former Vice President Joe Biden urged caution in reading too much success into the report. “For everyone whose job hasn’t come back, for everyone who doesn’t own stock, who can’t get the sweetheart loan through connections, does this feel like a victory?” Biden said after the president’s presser.
Many experts had predicted a jump in jobs, but the biggest surprise for many was the recovery among leisure and hospitality sectors, which gained more than 2 million jobs in June.
“I’m concerned overall,” said Elise Gould of the Economic Policy Institute in an interview, noting that the jump in leisure and hospitality will likely be short-lived as several states experience rising rates of Covid-19. “I think this is perhaps the best report we’re going to see in a while. I’m concerned that Congress thinks that the job is done.”
Another concern is that new unemployment claims continue to roll in. According to Labor Department’s weekly report, about 1.4 million Americans applied for unemployment benefits the week ending June 27.
New claims have dipped only slightly below those filed the prior week, and more than 19 million continuing claims — the measure of Americans who continue to receive unemployment — were reported by mid-June.
“Progress of course but still a ways to go,” wrote Peter Boockvar, chief investor officer at Bleakley Advisory Group, adding that unemployment likely won’t start to dip below 1 million new claims per week until unemployment benefits expire later this month. Such data makes little difference, he emphasizes, until “after the economy is mostly reopened.”
The steady slog of new unemployment claims may seem to contradict the positive jobs reports, but the data clash is not unusual, according to economists at the Federal Reserve Bank of St. Louis.
“First of all, data related to the labor market come from different sources,” the researchers wrote in a blog post. “Finally, keep in mind that changes in the number of persons listed on payrolls do not correspond to changes in the number of persons employed or unemployed.”
The St. Louis Fed researchers pointed to similar discrepancies between payroll employment and unemployment claims several times last year.
Many experts chalk up the good jobs report to the various stimulus programs, such as the $600 plus-up for weekly unemployment benefits and the Paycheck Protection Program’s loans to safeguard employees of small businesses — two programs that are nearing their expiration dates.
The boosted unemployment benefits will run out at the end of the month, and, while the PPP application deadline has been extended until Aug. 8, lawmakers are trying to draft ways to target the $130 billion remaining in the program’s coffers.
“I think the strength of those things will tell us what will happen when they go away,” Gould said. “The effect could be pretty quick.”
Many experts will be looking at the state-by-state jobs data released later in the month, which may paint a more fulsome picture of how different regions are dealing with the spike in Covid-19 cases on their economies.
To date, more than 10.7 million people have been infected by Covid-19 worldwide, while about 517,000 have died, according to data compiled by Johns Hopkins University. In the United States, 2.7 million people have contracted Covid-19, while more than 128,000 have died.