The Bureau of Labor Statistics released the June nonfarm payroll data on Thursday which showed 4.8 million Americans found jobs last month, dividing opinion among economists about how strong the US recovery will be.
The figures beat analysts’ estimates of 2.9 million jobs, and eased the unemployment rate down to 11.1% in June. It had spiked to 14.7% in April and in May Goldman Sachs predicted that the US unemployment rate would peak at 25%. In May, the economy added 2.5 million jobs. However, in March and April more than 22 million jobs were lost as employers cut payrolls during the height of the coronavirus shutdown.
“The market is pricing in more of a V-shape recovery. It’s certainly pricing in a V-shape recovery in terms of earnings, said Kate Moore, head of thematic strategy for BlackRock’s Global Allocation investment team. “The consensus is at about $163 [for S&P 500 earnings] for 2021, and we’re trading at 19 times that at current levels. So I think what the analyst and investment community need right now is confirmation from companies as they report second-quarter earnings, which are going to be abysmal, confirmation that they’ve modified their business models and they are thinking about an existing Covid, not a post-Covid, world.”
Nada Eissa, former deputy assistant secretary of the Treasury for economic policy had a word of caution. She said: “I don’t think the numbers are meaningless, but I do think that we’re not thinking about the fact that we have this resurgence in the virus, and the resurgence has two elements. One is the unforced errors by officials who basically opened without following the guidelines and have had now to pull back.”
Eissa added: “But we’ve also seen a resurgence in places that did do the hard things so restaurants were set to open for diners in New York City. That’s now on hold. And so I think that, looking forward, I don’t know that we’re going to be able to see the same types of job growth or continued job growth. I think it’s going to be very jagged.”
David Rosenberg, founder of Rosenberg Research said the US jobs market still has a lot of ground to recover.
Rosenberg said: “It’s still not clear to me as though today’s job number in and of itself gives you a V-shaped recovery …. But we have to keep in mind the deep hole we’re coming out of. I mean, there’s no question that the jobs are coming back more quickly than anybody would have anticipated, including me just a few months ago.
He added: “But we have to also recognize the fact that the economy was reopening ahead of schedule, so it would make sense that we start seeing some job creation coming back. But the hole is still so big in the context of losing 22 million jobs in two months so far. With all the reopenings that have happened and all the stimulus that’s taken place, we’ve recouped a grand total of one third of that.”