Moneybeat – Millions of Americans return to work


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

NICK EICHER, HOST: As the American economy continues slowly opening back up, lost jobs are coming back. And they are returning much faster than economists expected.

For the second month in a row, millions of jobs have returned: The government counted nearly 5 million for June, on top of nearly 3 million for May.

These are record increases. 

But they’re also signs of how far we’d fallen when states began shutting down businesses, stores, and restaurants and travel ground to a halt.

Because even with 7-and-a-half-million jobs added in two months, we’re still almost 15 million jobs below where we were when the coronavirus arrived on our shores.

The official unemployment rate for June fell from 13.3 percent the previous month to 11.1 percent. 

Still double-digit unemployment—a staggering number—when you consider the February rate was just 3.5.    

Time now to talk with David Bahnsen, financial analyst and adviser. He’s in New York with his family, traveling outside of California for the first time in a long time.

Welcome, David.

DAVID BAHNSEN, GUEST: Yes, it is good to get back out here. It’s been a crazy few months.

EICHER: Let’s talk about the jobs report. Another big surprise, 4.8 million jobs gained in June. Way ahead of economists’ expectations.

BAHNSEN: Well, I think it’s a theme you and I have talked about a couple times and it does apply to this report, but it applies to so many past and you have to think future reports, which is the provable inability of economists, analysts, and pundits to necessarily project with even a proximity of accuracy on some of these things. And I’m not saying that as a criticism. I’m saying it as an actionable comment around the reality of how unprecedented this moment is. 

And so when they’re projecting 3.2, 3.3 million jobs and you end up at 4.8, that’s a 50 percent miss. We know how off it was last month, where not only were they off; you can’t even apply a percentage because they were off by the wrong direction. I think that this is just simply a comment on the unprecedented nature of what we’re seeing.

EICHER: Right, because even this record rise doesn’t make up for the worst-ever job loss in April and the second half of March. Together, 22.1 million jobs lost and that set the clock back all the way to the end of the last financial crisis. We’ve got a lot of digging out to do still. So to the extent the new job report is positive, it’s positive against a negative backdrop.

BAHNSEN: Well, it’s very negative. It may be worse than that. 

Now, again, when I say worse than that, it’s because you don’t know who’s left the labor force altogether. But the point is from a trajectory standpoint, you are nowhere near this economy operating at full capacity. 

You have the largest states in the country still in a quasi-shutdown and some of their entire sectors. You look at the city of Manhattan that I returned to this week, which is the largest restaurant city in America, and they’re not even open inside yet and over half are not open outside. And yet you still see this type of job recovery. 

So, yeah, there’s certainly a lot of room to go. I can’t imagine anyone would say any different. But the point is, as to where we are this quick in the cycle, these are numbers many people thought we might see—might—by middle of September, not by middle of June. And so to get a report at Fourth of July instead of Labor Day of this type of leisure, hospitality, retail job recovery, it speaks well to the lower income parts of the economy that I think you have to have a heart for right now.

EICHER: Digging deeper into that Labor Department report, we also had a rise month-over-month in labor force participation rate. It’s still below the 63.4 percent in February, but it did tick up to 61-1/2.

BAHNSEN: I think that, honestly, Nick, it’s hard to look at month-over-month and the reason why is that unlike the great recession, the financial crisis, where it was these totally structural things happening that were leading to this kind of mental and emotional frustration that caused people to leave the job force altogether. 

If anything right now, there’s this excessive hopefulness that people kind of really believe a job’s coming back very quickly. And so I don’t expect that you’re going to get the same impact for labor participation force unless they end up extending that unemployment benefit at a federal supplemental level in a meaningful way at the end of July. That, I think, would do incredible damage to the labor participation force. 

When President Obama extended those unemployment benefits out of the financial crisis, ended up being for two years—and that dollar amount was nowhere near what this level is now—but my point is that gives an economic incentive for people on the margin to not work. And to then classify themselves as not looking for a job, which is what the labor participation force essentially measures. 

So, we have to watch that data because you’ve got to remember, this unemployment number here that we’re a little bit encouraged by today, that’s with a $600/week supplement from the Fed still paying. 

So, we don’t know what they’re going to do by the end of July, but if anything is going to represent a meaningful improvement to unemployment, they will be taking away a paid incentive for people who might have access to work to not work.

EICHER: So that unemployment benefits bonus remains a disincentive, but I wonder whether it’s too soon to conclude that jobs recovery we’re seeing validates the Paycheck Protection Program to bear up small business? Can we say it’s a big success?

BAHNSEN: Well, the Paycheck Protection Program has been a big success in terms of the fact that it put off a lot of money very quickly in the hands of small businesses. I don’t think any of that is really disputable. But for me to say the whole program has been a big success, I’d like to wait a few more months because you want to see what kind of forgiveness is applied for. 

Ultimately, if a bunch of people got free liquidity for a few months and then paid it back and still fired their people anyway, that’s not going to be a success. Now, I’m not expecting that. I think most of these people who took PPP loans are going to want forgiveness, meaning they’re not going to want to pay the loan back because they kept the payroll intact. 

No question, the premise in your question is right. Circumstantially it really looks like PPP played a big role, I mean big, in holding some payrolls together. But I think we’re going to measure that with more specificity and perhaps an even bigger magnitude of success in a couple months.

EICHER: Let me get your read on the market week. A holiday-shortened week, but it’s like 3 percent gains on all the major indexes.

BAHNSEN: Yeah, the S&P 500 was up all four days this week, only the second time in five months. 800 points on the week on the Dow and that’s with an explosion of headlines around COVID case growth. So, to me, the market is making a really firm stand, not against some of the economic vulnerabilities, not against where U.S.-China can go, not against valuations maybe getting too rich. All of those vulnerabilities are out there. 

But at least as it pertains to the incessant, nonstop drumbeat of “Oh my gosh, there’s more COVID cases coming” so forth and so on. There’s no way the media could have played this more sensationalistically this week and yet the market has just completely shrugged it off as mortality rates continue to drop, as hospitalization rates still look quite benign. I think we’re getting to a point where not only the markets but the economy are saying, “OK, fine. We’re going to have COVID cases. Let’s get on with our lives.”

EICHER: David Bahnsen, financial analyst and adviser. David, thank you.

BAHNSEN: Thanks so much.


(AP Photo/Elaine Thompson, File) In this June 4, 2020 file photo, a pedestrian wearing a mask walks past a reader board advertising a job opening for a remodeling company, in Seattle. 

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