Unemployment DECREASED by 2.5 million!

[disneysteve]

Look for another strong day in the markets as the latest jobs report, which was expecting 7-8 million more jobs to be lost actually saw a 2.5 million gain. Rather than the anticipated 20% unemployment rate, the rate actually dropped to 13.3%. As states and businesses continue to reopen, those numbers should only continue to improve. I know Disney just released a long list of all of the cast members who are being called back as they get set to reopen on July 11 (and some of the resorts are reopening later this month).

I've said all along that most of the job losses would be temporary until quarantine was lifted. There are absolutely jobs that won't be back. Many businesses have filed for bankruptcy in recent weeks and many others have announced they are closing permanently. I posted previously about Sweet Tomatoes/Soup Plantation. JCPenney announced the closure of 154 stores yesterday. A local frozen yogurt shop posted yesterday that they won't be back. Pier One is gone for good. And plenty of others. But the vast majority of the recently unemployed will likely be back to work soon.

[bjl584]

I was just getting ready to post something about this, but you beat me to it.
Good news for those out of work.

[QuarterMillionMan]

California 25% unemployed. DOW up +737 at the opening bell. There is a disconnect between Wall st & Main st.

[bjl584]

California 25% unemployed. DOW up +737 at the opening bell. There is a disconnect between Wall st & Main st.

Wall Street is looking ahead to probably year end.
There is a disconnect, but they aren't reacting to how things are today.
They are reacting to how they think things will be in 6 months.

[disneysteve]

California 25% unemployed. DOW up +737 at the opening bell. There is a disconnect between Wall st & Main st.

The national unemployment rate dropped from 14.7% to 13.3% despite all expectations being that it would rise to 19-20%.

As bjl584 said, the market is forward-looking. Things are recovering. Outdoor dining and indoor non-essential retail here in NJ reopens next Monday. I personally know retail and restaurant workers here who have already been called back to work in preparation. Salons and barbers open the following Monday so I'm sure they'll be called back shortly. PA is ahead of us in their reopening so many people there are already in the process of returning to work. As I said, Disney World in Florida has already begun to reopen with Disney Springs. Some of the resorts open June 22 and the parks start reopening on July 11. That represents tens of thousands of employees getting back to work. Airlines are boosting their flight schedules sharply in July so all of their employees and all of the support chain businesses are ramping back up.

I don't think the disconnect is as large as you think.

[QuarterMillionMan]

Unemployment pays more than their jobs pay so I see a lot of people not wanting to return to work and why risk COVID. Car sales rising due to people not wanting to fly and also risk COVID. Las Vegas is busy but those are the hard core addicts. People with good senses know better. Disney reopening but it remains to be seen if families will feel safe enough to return. I predict only a handful will return this summer.

[disneysteve]

Unemployment pays more than their jobs pay so I see a lot of people not wanting to return to work

If you turn down the offer to go back, you lose your unemployment benefits, so that isn't really a factor.

Universal Orlando reopened to the public today (and for select people a couple of days ago). There were plenty of people there, and Disney will have even more. They are both operating at reduced capacity to start but I guarantee they won't have any trouble filling every available spot.

Don't forget, there are still millions of Americans who think the whole COVID thing is a hoax, no different than the flu, refuse to wear masks, etc. They can't wait to go out and get back to their normal lives. As soon as places reopen, they'll be there.

[ua_guy]

People are going back to work, but I'm hesitant to get excited, unlike the market, which seems to behaving even more irrationally than it was pre-covid. I think there's a long road ahead with subsequent waves of covid as people re-gather. A couple of fears:

-People are going back to work but their employers may find that their business doesn't return fully to pre-covid levels. Airline travel is a good example. I know I don't want to get on a plane anytime soon. Or go sit in a crowded restaurant. (I still cannot get tested, do not know if I have/had covid, there is no vaccine, and I may be part of a higher-risk group).

-Most Americans were already broke before Covid, and many are behind on rent and mortgages. It isn't fully understood yet how banks will handle this and what the ripple effect may be.

-Unemployment runs out at some point.

I'm glad people are able to go back to work and I hope the future is bright. But the realist in me says there could be some real big problems coming.

[disneysteve]

People are going back to work, but I'm hesitant to get excited, unlike the market, which seems to behaving even more irrationally than it was pre-covid. I think there's a long road ahead with subsequent waves of covid as people re-gather. A couple of fears:

-People are going back to work but their employers may find that their business doesn't return fully to pre-covid levels. Airline travel is a good example. I know I don't want to get on a plane anytime soon. Or go sit in a crowded restaurant. (I still cannot get tested, do not know if I have/had covid, there is no vaccine, and I may be part of a higher-risk group).

-Most Americans were already broke before Covid, and many are behind on rent and mortgages. It isn't fully understood yet how banks will handle this and what the ripple effect may be.

-Unemployment runs out at some point.

I'm glad people are able to go back to work and I hope the future is bright. But the realist in me says there could be some real big problems coming.

All valid concerns for sure, but as I said, there are millions of Americans who feel very differently. They aren't at all concerned, not even a tiny bit, about COVID. It is totally a non-issue to them. Just read the comments on almost any social media post and you'll see them out in full force. They barely observed self-isolation, if at all, and are resuming all normal activities as soon as they are able to. And that group probably represents about 1/3 or more of the country.

I'm with you. I'm not getting on a plane unless absolutely necessary, but clearly the demand is there based on the announcements from the airlines about their July flight schedules. I am willing to go to a restaurant as long as reasonable precautions are being taken, but I know my wife is less enthused about that so time will tell what we actually do.

[corn18]

California 25% unemployed. DOW up +737 at the opening bell. There is a disconnect between Wall st & Main st.

Maybe CA should be more aggressive opening up their state. NY as well.

[disneysteve]

Maybe CA should be more aggressive opening up their state. NY as well.

Or not, based on their COVID situation.

[~bs]

probably the effects of the ppp kicking in and all the states starting to reopen. not that surprising to me. It's not really a job gain, but a small recovery of losses.

[~bs]

California 25% unemployed. DOW up +737 at the opening bell. There is a disconnect between Wall st & Main st.

wall street is forward looking. main street is current and backwards looking.

[Singuy]

I am calling it now, this is an employment dead cat bounce. Travel, entertainment, and dining will not even remotely be the same as before until at least 2 years into this thing(and post vaccine). Owners will find that it'll be more expensive keeping shop open and have 25% of their usual sales than to just keep it closed, especially restaurants. Same with travel because there are fix cost to everything. Anything that has razor thin margins cannot stay afloat when it takes 80%- 90% capacity just to break even. Cruise ships are notorious for needing at least 94% occupancy to break even(hence sometimes they pretty much give away the price of the ticket just to fill the ship).

So I would look to take profit on bets like cruise ships/travel/airline/dining when there's exuberance in the air.

[disneysteve]

I am calling it now, this is an employment dead cat bounce. Travel, entertainment, and dining will not even remotely be the same as before until at least 2 years into this thing(and post vaccine). Owners will find that it'll be more expensive keeping shop open and have 25% of their usual sales than to just keep it closed, especially restaurants. Same with travel because there are fix cost to everything. Anything that has razor thin margins cannot stay afloat when it takes 80%- 90% capacity just to break even. Cruise ships are notorious for needing at least 94% occupancy to break even(hence sometimes they pretty much give away the price of the ticket just to fill the ship).

So I would look to take profit on bets like cruise ships/travel/airline/dining when there's exuberance in the air.

Yes and no.

I think air travel is coming back. They unfortunately aren't subject to any of the state guidelines regarding masks and social distancing, which has already been evident on the packed flights that have continued to fly throughout the pandemic. The Fed would have to impose those rules and the Fed has been completely useless in dealing with COVID.

75% of airline profit comes from business travel, so the airlines don't care so much initially if you are taking a trip to the Grand Canyon or going to visit grandma. It's the business travel they want primarily, and as travel restrictions are lifted, that is coming back. I know a few people who never stopped their business travel this whole time and a few others whose jobs are already starting to make travel plans for them in the next month or two. I agree that leisure travel will be slower to recover.

Restaurants, I think, are a mixed bag. Virtually every restaurant in town has remained open for take out business. Surely, if they were able to do that, it will help them to be able to reopen the dining room even if it's only at 30% capacity to start. That's better than 0%. I do think we may see slimmed down menus with fewer options, focusing on their top sellers. That will reduce their food costs, simplify food prep, and reduce staffing needs.

I think the biggest problem with cruise ships will be ongoing travel restrictions. Canada has banned ships with more than 100 people until the end of the year. Many countries are still seeing their COVID cases rise daily. They haven't peaked yet like the US has, so they won't be opening their borders until the situation improves which could be months away. So the cruises will be limited as to where they can draw guests from and where they can sail to.