Best Job Gains Ever As Record Unemployment Was Expected

Consensus forecasts are never precise and during this historic health experiment inducing an economic heart attack to battle a pandemic, wide margins of error in expectations are unsurprising. Normally, a forecast miss of 100,000 in payroll estimates is shocking, but adjectives are elusive when describing a consensus miss of 10 Million.

Friday, the nonfarm payrolls for May were expected to fall by 7.5 to 8.3 Million and instead they rose 2.5 Million, the largest gain in history. The largest gains were seen in restaurants and bars, an area along with travel that has been the hardest hit during this three month mini-Depression. Instead of almost 20% unemployment, which everyone expected today, the rate fell to almost 13%. Furthermore, this data is based upon mid-May surveys when only modest reopenings around the country had begun. Continued gains in late May through June are virtually guaranteed, despite significant reporting errors. This continues to be a Bullish UPOD (under promise, over deliver) stock market.

Job gains in May were strongest in the hospitality sector as restaurants, bars and casinos called back their workers faster than estimated. Beleaguered airlines still report an 85% year over year drop in passenger gate traffic, yet travel is at a 10 week high and up 22% in the past week.

Boeing stock leapt 50% just this week on the approval of restarting its critical 737 Max airliner, as well as the improving news of more airline routes being added. Stocks are soaring, the economy is still in a deep contraction, yet conditions are not as bad as feared. For weeks the data keeps coming in above dire estimates, causing upward revisions in economic and company forecast valuations. While our 2020 outlook and beyond has been Bullish since March, our bias has been too conservative short term. Strong Bull market up trends tend to make it hard to find a pullback to buy. During the past 11 weeks there has never been more than a 2 or 3 day decline, as a buy the dip mentality for a more V shaped recovery keeps gaining traction.

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Alpha Stockman 4 weeks ago Member's comment

There was a miscalculation in the number. Go read the bottom of the actual release, it should be 3% higher.

Kurt Kallaus 3 weeks ago Author's comment

Yes, the main BLS report stating 13.3% Unemployment "could" have been closer to 16% due to imprecise gross miscalculation errors regarding absent workers they have yet to fully rectify. Likely further official upward revisions - common - of the 13.3% rate will be forthcoming. The final number is uncertain, but the far better than 19.8% consensus estimate still highlights a recall of absent workers in large part due to PPP loans. As the forgivable loans were received & the economy began to open, more workers were called back, especially in the critical Service sector.