Market Update June 5, 2020 – Our Quick Take on the Surprise Jobs Rebound

Published by Waycross Partners on

Market Update June 5, 2020 – Our Quick Take on the Surprise Jobs Rebound

The May jobs report was released this morning and was much better than expected, with the US unemployment rate falling to 13.3% as payrolls rose by 2.5 million, rather than the expected additional job losses and a rise in the unemployment rate to around 19%. According to Bloomberg, out of 78 reported economist forecasts, NONE expected job gains in May.

So, what do we think happened?

Job increases were widespread across industries but particularly noticeable (about half) in food service. Following COVID-19-related lockdowns, restaurants slowed/closed and employees were furloughed.  Over time, as the industry adapted to curbside service and slowly started to reopen, hiring managers were able to recall these furloughed employees.  But…not all of these employees elected to return, for various reasons, including continued COVID concerns and the widely cited notion that they may actually be making more money being unemployed due to government subsidies. 

So as a result, hiring managers turned to new workforce participants (most likely undergraduate students that have time on their hands because their schools closed).  These people were not technically unemployed before because they were not actively seeking jobs.  But if you pay them an extra $2 or $3 an hour, they will go get a job. 

Net net: The Treasury curve is steepening due to the lower probability of more stimulus.  A steeper curve (and lower risk of bad loans) bodes well for banks and other cyclicals.

Waycross Partners, LLC (“Waycross”) is an independent, privately owned investment management firm registered with its principle place of business in Louisville, Kentucky. Waycross offers investment strategies to our clients, which are made up of institutional and high net worth individuals. This material is for informational purposes only and is neither an offer nor solicitation to invest. Please read all offering memorandum, ADVs, and other risk disclosures before investing. Any projections, market outlooks or estimates in this document are forward looking statements and are based upon certain assumptions. Other events which were not taken into account may occur and may significantly affect the returns or performance . Any projections, outlooks or assumptions should not be construed to be indicative of the actual events which will occur. The enclosed material is confidential and not to be reproduced or redistributed in whole or in part without the prior written consent of Waycross Partners. The information in this material is only current as of the date indicated, and may be superseded by subsequent market events or for other reasons. Statements concerning financial market trends are based on current market conditions, which will fluctuate. Any statements of opinion constitute only Waycross Partners’ current opinions, which are subject to change and which Waycross Partners does not undertake to update.

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