Market Watch Weekly | June 5th, 2020 | Well, That Was Unexpected...
Erik Dekker - Jun 05, 2020
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Wow. That was the universal reaction amongst economists, strategist and investors on Friday following the biggest payroll surprise in US labour market history, and by a lot. We came into Friday looking for the May nonfarm jobs number to fall 7.5M and an unemployment rate of almost 20%. Instead we saw the U.S. labour market regain 2.5 million jobs with the unemployment rate declining to 13.3% from 14.7%. In the greatest miss in forecasting history, the May jobs report demonstrated that America is going back to work. This report needs to be put in context —the economy is still in a deep recession. However, it is also clear that the recovery has begun, and that it is ahead of schedule.
The May gain was by far the biggest one-month jobs surge in U.S. history since at least 1939. The only previous month to register more than a million jobs was September 1983, at 1.1 million. Some of you may recall one of our notes in May that mentioned 78% of employees that were furloughed believed the job loss would be temporary. It turns out that some of that optimism is thus far warranted. It was these sort of White Swan events we discussed that posed a risk to market participants getting too bearish. White Swans (positive probable events) are the inverse of Black Swans (negative unexpected events of large magnitude) and this jobs reportis a perfect example of how the market can make a fast and unexpected move to the upside on single event.
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