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Record Drop in April Non-farm Payroll

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April non-farm payrolls reported by the U.S. Bureau of Labor Statistics (BLS) this morning posted an expected record drop of 20.5 million jobs for the month. The voluntary shutdown of most facets of the economy in order to thwart the spread of COVID-19 coronavirus was bound to have a dire effect on jobs numbers, as we’ve seen in weekly jobless claims. The Unemployment Rate shot up to 14.7%, a post-World War II high.

The “good news,” such as it is, revolves around both figures beating estimates: analyst were looking to 22.1 million jobs lost in April and an unemployment rate of 15.2%. But that’s about it for silver linings, except for the fact that we are progressing through the morass and will, one day, tromp firmer soil. Revisions to the previous two months almost add insult to injury: March’s -870K is well down from the -701K reported a month ago. February’s BLS headline fell from an original +275K to +230K. Remember 200K+ jobs gains? This seems like a light year away this morning.

Average Hourly Earnings did go up last month, by $1.34 (+4.7%) to an average of $30.01 per hour. The Average Workweek went up 0.1%, as well. However, this can be seen as more of a case that lower-wage workers make up a large share of these huge job losses, where higher-paid employees look to be more likely to have held onto their positions. Labor Force Participation fell to 60.2% from 62.7% in March. The U-6, aka “real unemployment,” shot up to 22.8%.

The private sector lost 19.5 million, and the million-odd balance came from government workers. Leisure/Hospitality, unsurprisingly, lost 7.7 million jobs in April, down 47% — the most of any industry. Even Education/Healthcare, which had been exhibiting strength for the past several quarters, lost 2.5 million jobs last month.

None of this seems to have had the slightest ill effect in today’s pre-market, however. Ahead of the BLS release, the Dow was up 230 points, the Nasdaq +90 and S&P 500 +30. These indexes actually rose from these levels directly upon the earnings announcement — likely reflecting the improvement over estimates — and seem to be buoying even higher at this hour. We may want to chalk this up to the huge February and March sell-off, but recall the Nasdaq is now trading in the green, year to date.

This market exuberance appears to be pricing in a COVID-19 treatment on the horizon and a subsequent move to economic normalcy, combined with notable amounts of pent-up demand which will add an extra boost to industries everywhere. But there are plenty of moving pieces within this scenario that may make this difficult to achieve, at least right away. And this is before addressing the matter of paying back the trillions of dollars in stimulus brought forth to deal with the initial economic challenges the “shelter in place” orders have wrought.

None of this is meant to throw cold water on this morning’s rally in the face of the worst BLS report in American history. But we do advise caution going forward — markets appear to be pricing in a post-coronavirus recovery of perfection. We know the world doesn’t usually work like that.