Coronavirus caused havoc on the regular way of life and ushered in a market correction after many years of a solid bull-market run. New initial jobless claims report was released for the week ending 24-May-2020 and it wasn’t pretty: Another 2,428,000 Americans applied for unemployment benefits this week, more than the expected 2,400,000. It is however, still an improvement on last week’s 2,687,000.
As we’ll see, the numbers may be an improvement but we’re not out of the woods yet.
Employment Ravaged By Corona
The United States suffered its highest ever initial jobless claims report in March as the Corona virus was just heating up across the country, triggered by a wave of shelter-in-place orders and social distancing measures across states. Particularly hard hit were the hospitality and travel industries, which were crushed by the collapse in global tourism, as countries across the globe closed off their borders.
Following strict social distancing measures, most businesses were forced to close temporarily – sending millions of workers into an uncertain future as the government began deliberating a fiscal package to soften the blow of the crisis.
Emerging Unemployment Trends
The combination of these acts and the tidal wave of businesses shutting down lead to a peak of 6,867,000 jobless claims in the first week of April – compared to 217,000 at the beginning of March – a 31-fold increase.
While the overall trend of the jobless claims is trending down, each week has been above the forecasted result, showing how badly hit the labor market has been affected by the coronavirus. Additionally, while the downtrend in initial jobless claims is a positive, one must remember that each initial claim adds on to the previous if the individual does not find a job.
With that, we see that continuing jobless claims remain worryingly high. From April onwards we have seen a drastic and sharp uptrend with no signs of letting up. The ongoing jobless claims currently sits at 25 million, as the initial jobless claims continue to pile up. Many economists are focused on this number rather than initial jobless claims.
Fed Chairman Jerome Powell and Treasury Secretary Steve Mnuchin both came out with rather bearish views on the economy. While both differed on what they deemed to be necessary approaches to prop up the economy, they did agree on one thing: We need to accept the fact that the economy will most likely not fully recover until 2021, or even 2022.
Powell stated that the government needs to step up their fiscal policies in order to stabilize the economy while the Federal Reserve continues to do all it can. Mnuchin on the other hand stated that despite the risks, states should reopen sooner rather than later to avoid suffering irreversible economic damage.
How People are Dealing with the Crisis
We mentioned how people are stuck at home with no work, so how have they been dealing with the crisis?
Well, it is no surprise to hear that social media usage is on the up and up. Facebook posted its quarterly results and revealed that usage among all its platforms grew significantly during the pandemic. Likewise, social media newcomer Tick Tock’s owner company has seen its valuation surpass $100 Billion.
Scrolling isn’t the only thing people are doing – Uber reported that its UberEats segment pulled in the majority of its revenue for this quarter, slightly offsetting the collapse in Uber ride hailing service. This surge in food delivery demand led Uber to attempt a merger with Grubhub.
Finally, retail investing has been gaining popularity since the market started dropping in March, with interest in investing and trading growing by the day. There could be numerous reasons to explain why this has occurred during one of the most drastic downturns in market history. One clear reason is that online stock brokers are now more accessible to the everyday investor than ever, each offering a user-friendly experience and a range of benefits.
As we have seen, the United States and the rest of the world still have a long way to go. All the experts have confirmed that it will take a long time for the economy to get back to where it was before the pandemic. With that being said, we see a relatively clear path forward: The Federal Reserve has stabilized markets, and the federal government has put forth a plan for states entrusting governors to gradually open back up. The question isn’t if, but rather when and how? One thing is sure, the market value has been brought down once again for retail investors to get in on a piece of the action; perhaps this is a market correction that will prove to level the investment playing field for the masses.