June 23, 2020

It Looks Like the Back to Work Wave Has Begun

EXCERPT:  The latest unemployment numbers show that more jobs are being added to the economy. While not the best numbers, such data shows that the back-to-work wave has begun.

The unemployment rate dipped to 13.3% in May, signalling a possible wave in workers heading back to work.

Based on the latest numbers in unemployment, it looks like Americans are finally heading back to work as the nation grapples with the coronavirus pandemic.

The month of May saw an addition of 2.5 million jobs, as the labor market springs back to life following weeks of lost jobs and failed businesses. That's the highest number of jobs added in one month on record dating back to 1948.

The unemployment rate dropped to 13.3 percent in May, up from April's 14.7 percent. While that number isn't exactly great, it's a step in the right direction, especially when considering the fact that employment has been down by almost 20 million jobs since February.

But the permanent vs. temporary unemployment numbers - though still high - pale in comparison to the last recession. A total of 3 million people were reported to have permanently lost their jobs over recent weeks, which is a far cry from the 8.3 million workers without jobs in October 2009 after the financial crisis.

Latest Data Shows Promise For the Economy

There are still obstacles ahead to get more workers off unemployment, including the potential of another spike in infections into the fall, as well as social uprising sweeping the nation. But the latest numbers are promising and are giving Americans hope that there is a light at the end of the tunnel.

May's job report offers some hope that the economy is moving past its rock bottom from the pandemic and finally climbing out and that it may recover even faster and sooner than what was initially anticipated. After stocks plunged weeks ago in the wake of the pandemic, they've now soared on the heels of news of a better employment picture. The Dow Jones Industrial Average and S&P 500 were up almost 3 percent each, and the NASDAQ is on its way to a closing high.

The coronavirus pandemic led to economic chaos, made worse by recent rioting. But the latest employment numbers show some promise that the economy is bouncing back.

Only time will tell if this is just a trend or if it's the start of long-term economic health, especially after the nation has seen some of the strongest employment numbers in recent years.

Hardest-Hit Industries Seeing Many Jobs Added

The recent unemployment numbers may not be the strongest, and the economy will likely improve at a slow and volatile pace. People are still incredibly concerned about a second wave of the virus, and the riots happening across the nation are not doing much for speeding up economic recovery.

But as financial aid from the government expires, more people will likely be heading back to work to pay the bills, which will accelerate the back-to-work wave. And as more Americans are ready to head back to work, many businesses that were once closed are opening back up.

New virus infections have eased in many areas, and the country's economy is now opening back up in phases. The restaurant industry just added 1.4 million jobs in May as the shutdown orders are being lifted. This was one of the hardest-hit sectors of the economy, which had dire effects on both workers and the businesses themselves. Other industries are also seeing a slew of jobs being added, including in the health care, construction, and retail space.

Thanks to government aid, many households were collecting more than they did at work. And after being boarded up at home, fewer households were spending money throughout the past three months. Today they have more disposable income available. This fact alone is a positive thing for the economy, as consumer spending will strengthen, bringing in more revenue for businesses and even adding more loan activity for lenders.

In this case, lenders should be prepared to add more loans to the books, but should only do so with extreme prudence. At the same time, risky, underperforming long-term loan assets that are currently on the books should be sold off to make room for stronger short-term loan assets, and Garnet capital can help with that.

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