Monday Moneybeat – Grim numbers with a silver lining

MARY REICHARD, HOST: Coming up next on The World and Everything in It: The Monday Moneybeat.

NICK EICHER, HOST: It appears the coronavirus shutdown has in a little over a month’s time destroyed the number of jobs it took a decade of job growth to create.

In other words, the April jobs report from the Bureau of Labor Statistics is in. And it estimates job losses of 20.5 million, on top of 800-thousand lost in March.

For context, February 2020 was the record-setting 113th straight month of job gains going back into 2010. The job creation in that decade was 22.8 million.

That’s why I say these last two reports are very close to wiping all of those jobs out.

Financial analyst and adviser David Bahnsen is on the line for our weekly conversation. David, good morning.

DAVID BAHNSEN, GUEST: Well, good morning, again, Nick.

EICHER: You’ve been predicting this and we’ve been talking about it for some time. But I can’t take my eyes off this Labor Department report. I’ve never seen anything like it and I know you haven’t either. Larry Kudlow, the White House economic adviser, called it heartbreaking. There’s probably no other appropriate word.

But it is a rearview mirror look, and we did have a week-to-week decline in initial jobless claims, that trend continues, and we’re starting to see phased reopening.

Start where you like, but how do you analyze the week?

BAHNSEN: Well, the most significant thing about yesterday’s jobs report—once you’re past the tragedy of the basic realities, all of which were not a surprise and yet no less tragic by their foreknowledge—but the most surprising piece or interesting piece and perhaps hopeful piece is that 78 percent of those 21 million newly unemployed are expecting temporary, they’re in the temporary jobless category, OK? That’s a really, really important reality here. 

This is employee-identified as being on a temporary layoff, so obviously their employers may feel differently and may end up acting differently. 

But my point being that if 50 percent—instead of 78 percent—prove to be temporary, that means that you have 10 or 11 million people going back to work by July 1st. 

That is going to be a really, really positive thing. And it’s, frankly, what I expect. I’d love for it to be all 78 percent. I think that’s too optimistic, but that’s the interesting part. I was not expecting that high a percentage to identify in the temporary layoff category.

EICHER: So, is that what you attribute the pretty decent stock market week to or are they looking at something way farther down the time horizon?

BAHNSEN: Yeah, it’s going to be kind of a weekly conversation for us because it’s the same factors week in and week out right now, and that is that the stock market was well aware of the fact that people were losing jobs hand over fist far before the jobs report came out. 

So, just as has been the case with the initial jobless claims data for the last seven weeks, the monthly Bureau of Labor Statistics report is not reporting anything that could not have been predicted. 

Now, what you do get out of the reports, though, is the weeds. You get to see, you know, that 5.1 million of job loss was in food and beverage, hospitality. That 2.1 million were in retail, 1.4 million in blue-collar manufacturing. And that average hourly wages went up month-over-month. 

And so the initial impulse might be that someone says, “Wow, that sounds positive!” But it’s, of course, a disaster because the reason hourly wages went up is because the vast majority of the new unemployment is in the lowest decile of wage earners. So you are seeing the highest pain and misery with the most unfortunate in society. That’s what that data point really indicates. 

So, all that to say that the stock market is going higher because of unprecedented Fed intervention, monetary stimulus, fiscal stimulus, and the expectation that there’s going to be a recovery in the economy and that 10,000 points coming off the market priced in a good portion of it. Half of that’s been made back and we’re in this sort of middle ground zone now and there’s not a lot of other places to put capital. 

So, large cap U.S. stocks become a more attractive alternative than a bond market that pays zero and international stocks that are much more volatile.

EICHER: David Bahnsen, financial analyst and advisor. He’s Chief Investment Officer at the Bahnsen Group. David, grateful for your time. Thanks again for talking this through with us week after week and we’ll catch you next time.

BAHNSEN: Thanks so much, Nick.

(AP Photo/Mary Altaffer, File) In this Jan. 3, 2020 file photo, the Wall St. street sign is framed by U.S. flags flying outside the New York Stock Exchange in New York. 

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