Equities surge, bonds tumble on surprise U.S. jobs gains

[rooster59]

Equities surge, bonds tumble on surprise U.S. jobs gains

By David Randall

 

FILE PHOTO: The Wall Street sign is pictured at the New York Stock exchange (NYSE) in the Manhattan borough of New York City, New York, U.S., March 9, 2020. REUTERS/Carlo Allegri/File Photo

 

NEW YORK (Reuters) - An unexpected jump in U.S. employment sent world equities and oil surging on hopes that the global economy has started to recover from the coronavirus pandemic, pulling investors out of perceived safe havens like government bonds and gold.

 

U.S. nonfarm payrolls rose by 2.509 million jobs last month after a record plunge of 20.687 million in April. Economists polled by Reuters had forecast the unemployment rate jumping to 19.8% in May and payrolls falling by 8 million jobs.

 

"The numbers are a huge surprise to the upside," said Michael Arone, chief investment strategist at State Street Global Advisors. "It has confirmed what many folks were suggesting: that the effects on the labor market from the pandemic were temporary and that when the economy reopened and the infection rates started to diminish, that these jobs would come back."

 

MSCI's gauge of stocks across the globe <.MIWD00000PUS> gained 2.04%. The index is now down 4.5% for the year to date and trading at its highest level since early March, before the U.S. economy went into lockdown in an effort to slow the spread of the novel coronavirus.

 

On Wall Street, the Dow Jones Industrial Average <.DJI> rose 829.16 points, or 3.15%, to 27,110.98, the S&P 500 <.SPX> gained 81.58 points, or 2.62%, to 3,193.93 and the Nasdaq Composite <.IXIC> added 198.27 points, or 2.06%, to 9,814.08.

 

The broad S&P 500 is now down about 1% for the year to date.

 

Equity gains were widespread before the surprise jobs report. MSCI's broadest index of Asia-Pacific shares outside of Japan <.MIAPJ0000PUS> rose 0.9%, reversing early losses to stay near a 12-week high.

 

The index is up about 7.6% this week, on track for its best weekly showing since December 2011.

 

Emerging market stocks <.MSCIEF> were up 0.7% and also on course for their best week since December 2011.

 

Hopes for a swift economic recovery sank U.S. government bonds, which had reached historic highs on fears that the pandemic would erode consumer demand. Benchmark 10-year notes <US10YT=RR> last fell 20/32 in price to yield 0.8851%, from 0.82% late on Thursday.

 

"The sell-off in the bond market in the last few weeks seems to be justified," said Subadra Rajappa, head of U.S. rates strategy at Societe Generale. "This is a tremendously positive step in the right direction, and probably points to a faster recovery, at least in the jobs market, than people had expected."

 

Bond investors will get further insight into the likely direction of the economy when the U.S. Federal Reserve holds its regular two-day policy meeting next week.

 

Europe has now clawed back two-thirds of the losses incurred amid the coronavirus pandemic and Bank of America analysts said on Friday they expect European stocks to rise another 10% by the end of September on expectations of a pickup in business activity.

 

Set for a third straight week of gains, the euro rose to $1.1380 <EUR=>, its highest level since March 10 and was on course for a weekly jump of 2.5%.

 

The dollar index <=USD> made a tepid recovery, rising 0.08% to 96.84, but remained on track for its third consecutive week of losses and close to its lowest in nearly three months.

 

Hopes for an economic recovery sent oil prices surging. U.S. crude <CLc1> recently rose 4.97% to $39.27 per barrel and Brent <LCOc1> was at $42.14, up 5.38% on the day.

 

(Reporting by David Randall; Editing by Nick Zieminski, Richard Chang and Will Dunham)

 

-- © Copyright Reuters 2020-06-06

 

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[Brunolem]

So China's industrial production up, Thailand's exports up and US employment up, and of course stock markets up...all this while the world economy is at a standstill!

 

Makes you wonder why bother to work?

 

Or maybe the stats are highly massaged...but no, they wouldn't do that, governments would never dare to cheat...

Edited June 6, 2020 by Brunolem

[TopDeadSenter]

Incredible achievement. Watching Bloomberg when the upside shock figures were released was hilarious. Jonathan Ferro's jaw dropped visibly. So let's see what the voters prefer in November. Trump and jobs, or the opposition and mobs.

Edited June 6, 2020 by TopDeadSenter

[mtls2005]

Here’s why the real unemployment rate may be higher than reported

 

The unemployment rate fell to 13.3% in May, according to a Bureau of Labor Statistics report on Friday. 

The agency admitted the real unemployment rate likely exceeds 16%.

That’s due an error in how furloughed workers were treated in the data sample. April’s unemployment rate would have been nearly 20% absent that same error. 

 

https://www.cnbc.com/2020/06/05/heres-why-the-real-unemployment-rate-may-be-higher-than-reported.html

 

"Incredible achievement"

[Brunolem]

9 minutes ago, mtls2005 said:

Here’s why the real unemployment rate may be higher than reported

 

The unemployment rate fell to 13.3% in May, according to a Bureau of Labor Statistics report on Friday. 

The agency admitted the real unemployment rate likely exceeds 16%.

That’s due an error in how furloughed workers were treated in the data sample. April’s unemployment rate would have been nearly 20% absent that same error. 

 

https://www.cnbc.com/2020/06/05/heres-why-the-real-unemployment-rate-may-be-higher-than-reported.html

 

"Incredible achievement"

And that's not all, the report is full of "anomalies", such as:

 

According to the American Dental Association, there are just over 200,000 dentists in the US. So how surprising it must be that at a time (as a reminder the survey week was from May 10th through May 16th) when most dental offices across the US were still shuttered (and in places like California they still are), a record 245K dentist office jobs were added, effectively undoing half of all the April job losses in this job category.

 

This is probably the most highly massaged job report in History... 100% BS! 

 

[xylophone]

34 minutes ago, TopDeadSenter said:

So let's see what the voters prefer in November. Trump and jobs, or the opposition and mobs.

Slight correction needed........."trump and lies, or Dems and lives".

 

There you go.

[Walker88]

Here's some more detailed analysis of the Bureau of Labor Statistics numbers released yesterday:

 

Total employment was 137.2 million, vs 168 million in January (when the UE rate was 3.5%). Assuming an unusual number of people did not retire permanently, the math would suggest actual UE is about 21.8%. Of the 137.2 million employed, 20.7 million are Part-time workers, and of those 10.7 million are people who would prefer Full Time but cannot find it.

 

Some of this can be accounted for by reviewing the methodology BLS uses to calculate UE. At least 9 million people who want work, but did not actively seek employment during what BLS calls the "Reference Week" (the week they use to sample data; it contains the 12th day of the month), are not counted as UE because during the week containing the 12th they did not 'make specific active efforts to seek employment' (even if quarantine restrictions prevented them from actively seeking a job).

 

To be counted as "employed", a person must have worked at least one hour during the Reference Week and have been paid. This is why even Part-time workers can be included in the 'employed' category. One hour of paid work during the week containing the 12th of the month is sufficient.

 

Of the reported employment gains, BLS reports 1.4 million of the 2.5 million reported were in "food services and drinking places".

 

The mix of employment gains as to wage level was reflected in the fact average hourly wages decreased by 29 cents in May, as many of the re-hired were in Minimum Wage jobs.

 

Productivity over the month fell by .9%, so despite the drop in wages, the cost of production increased over the month due to declines in worker productivity.

 

Adjustments were made for both March and April, where job losses for March were increased by 492,000 and in April by 150,000. This is normal as initial sampling of data is inherently inaccurate, with a Confidence Level of only 90%.

 

The BLS makes regular Seasonal Adjustments to data, depending on such things as important holidays, severe weather, or opening/closing of schools.

 

BLS often adjusts the methodology for its Seasonal Adjustments, and for the May data released 5 June one change was that it did not count those deemed to be "Temporarily Laid off" as unemployed, even though these people were not being paid and had filed for Unemployment Compensation. Had they been included in unemployed, the UE rate would be at least 3% higher than the reported number.

 

 

[Walker88]

53 minutes ago, TopDeadSenter said:

Incredible achievement. Watching Bloomberg when the upside shock figures were released was hilarious. Jonathan Ferro's jaw dropped visibly. So let's see what the voters prefer in November. Trump and jobs, or the opposition and mobs.

What specific Tweet was it that 45 produced that was responsible for the BLS numbers?

 

Perhaps you can illuminate for all by posting what specific thing 45 did to result in the BLS number.

[Brunolem]

3 minutes ago, Walker88 said:

 

Perhaps you can illuminate for all by posting what specific thing 45 did to result in the BLS number.

Maybe he was holding a gun to the head of the guy who was preparing the report... 

[Phoenix Rising]

5 minutes ago, Walker88 said:

What specific Tweet was it that 45 produced that was responsible for the BLS numbers?

 

Perhaps you can illuminate for all by posting what specific thing 45 did to result in the BLS number.

IMHO it was his humanity, humility, empathy and steadfast moral leadership that resulted in.........wait a minute!????

[bkk6060]

All this will lead to a Trump victory in November.

It is all about the money, never forget that.

[Walker88]

1 minute ago, bkk6060 said:

All this will lead to a Trump victory in November.

It is all about the money, never forget that.

Reported UE is 13.3%, actual is considerably higher. Both are Post WWII records, hardly anything of which one can feel happy.

 

If 45 tries to run on UE at Post-WWII record levels, it is unlikely to work.

[Susco]

5 minutes ago, bkk6060 said:

All this will lead to a Trump victory in November.

It is all about the money, never forget that.

One swallow doesn't make a spring.

 

There are 5 more months before it's November

[mtls2005]

52 minutes ago, Walker88 said:

What specific Tweet was it that 45 produced that was responsible for the BLS numbers?

 

Not sure there's an answer, but the president did set a new record for tweets on Friday, with just north of 200 197 tweets and re-tweets.

 

This may be the equivalent of nixon roaming the halls of the White House talking to the portraits?

 

In addition he did say, in regards to the "amazing" (un-) employment "figures":

 

On June 5, 2020, U.S. President Donald Trump stated during a talk about employment numbers that it was a "great day" for George Floyd, a black man who was killed May 25 after a Minneapolis police officer kneeled on his neck.

 

 

 

Gives new meaning to the phrase "Have a great day"?

 

Edited June 6, 2020 by mtls2005

[Eric Loh]

This probably the best summary of Friday’s equities rise. 

The whole market is not up,” said Giorgio Caputo, a portfolio manager at J O Hambro Capital Management, who said his firm has added to stockholdings in recent months. “It’s the best of times for some firms. It’s the worst of times for other firms.”

[bkk6060]

15 minutes ago, Susco said:

One swallow doesn't make a spring.

 

There are 5 more months before it's November

Which is all in his favor.

If the election was today he would probably lose.

Come November:

Covid more under control and therapies available.

The protests will be over.

Stock market up and economy in recovery.

Trump wins.

 

 

[Susco]

8 minutes ago, Eric Loh said:

This probably the best summary of Friday’s equities rise. 

The whole market is not up,” said Giorgio Caputo, a portfolio manager at J O Hambro Capital Management, who said his firm has added to stockholdings in recent months. “It’s the best of times for some firms. It’s the worst of times for other firms.”

https://finance.yahoo.com/news/may-jobs-payroll-surprise-masked-weaknesses-could-make-rebound-a-head-fake-183332405.html

 

May's jobs report surprise masked weaknesses that could make the rebound a 'head fake'

[Brunolem]

34 minutes ago, bkk6060 said:

Which is all in his favor.

If the election was today he would probably lose.

Come November:

Covid more under control and therapies available.

The protests will be over.

Stock market up and economy in recovery.

Trump wins.

 

 

And America dives into civil war 2...

[xylophone]

2 hours ago, Walker88 said:

To be counted as "employed", a person must have worked at least one hour during the Reference Week and have been paid. This is why even Part-time workers can be included in the 'employed' category. One hour of paid work during the week containing the 12th of the month is sufficient.

So in effect what you are suggesting is that these numbers are a load of old cobblers?

[Walker88]

2 hours ago, xylophone said:

So in effect what you are suggesting is that these numbers are a load of old cobblers?

No, I'm not saying that per se. Generally the BLS methodology is consistent month-to-month, but the models they use are constructed on data that is unlike anything the labor market has ever experienced this year. They don't actually collate real data, but merely sample what they believe is a statistically significant cross section of employers, then they extrapolate from that sampling an overall number.

 

Their models are unlikely to be able to account for Black Swans, that is, events that are new and were never accounted for when they constructed their models, like CV-19 layoffs and small business failures.  Maybe the numbers are fairly representative, maybe they undershoot, maybe they overshoot. Parsing their numbers with the weekly first time claims for unemployment (43 million since mid-March) as well as 'continuing claims' (people who remain on UE Compensation), it would seem the BLS numbers overshoot by a significant margin, and the UE rate is significantly higher. The numbers become more accurate when they are parsed with tax withholdings so that the true number of employed persons can be ascertained.  One can reasonably expect a massive revision to this number come July. Note that March---when the number of first time UE filings was less than April and May---the revision was 492,000 lower. April was 150,000 lower. In other words, BLS way overshot and did not come close to reflecting the actual level of unemployment, which turned out to be much higher. The March revision number was the highest revision ever made by BLS, which says their models simply cannot grasp the severity of the CV-19 effect. Generally revisions up or down are on the order of 5-15,000, nowhere close to half a million. Again, that shows the weakness in models constructed from normal data.

 

One thing that stands out is that BLS stated that of the 2.5 million jobs ostensibly created in May, 1.4 million were in "food services and drinking places". BLS also stated that average hourly wages fell 29 cents, which is one of the higher drops they have ever reported, even if the number sounds small. In essence what is happening is that bartenders, wait staff, and Fast Food workers got re-hired as those businesses opened, but pilots and airline mechanics, factory workers at Boeing, auto workers, etc., remain laid off.

 

One new bit of methodology that DID impact the June release was that BLS made a new definition of UE where those BLS assumed to be only laid off temporarily were not included. One could call that BLS' CV-19 adjustment. One wonders how BLS could make that assumption, but that does not necessarily mean it's wrong. Still, had they not re-defined UE, the stated rate would have been about 16.5%, even using their inadequate models.

Edited June 6, 2020 by Walker88

[xylophone]

35 minutes ago, Walker88 said:

No, I'm not saying that per se. Generally the BLS methodology is consistent month-to-month, but the models they use are constructed on data that is unlike anything the labor market has ever experienced this year. They don't actually collate real data, but merely sample what they believe is a statistically significant cross section of employers, then they extrapolate from that sampling an overall number.

 

Their models are unlikely to be able to account for Black Swans, that is, events that are new and were never accounted for when they constructed their models, like CV-19 layoffs and small business failures.  Maybe the numbers are fairly representative, maybe they undershoot, maybe they overshoot. Parsing their numbers with the weekly first time claims for unemployment (43 million since mid-March) as well as 'continuing claims' (people who remain on UE Compensation), it would seem the BLS numbers overshoot by a significant margin, and the UE rate is significantly higher. The numbers become more accurate when they are parsed with tax withholdings so that the true number of employed persons can be ascertained.  One can reasonably expect a massive revision to this number come July. Note that March---when the number of first time UE filings was less than April and May---the revision was 492,000 lower. April was 150,000 lower. In other words, BLS way overshot and did not come close to reflecting the actual level of unemployment, which turned out to be much higher. The March revision number was the highest revision ever made by BLS, which says their models simply cannot grasp the severity of the CV-19 effect. Generally revisions up or down are on the order of 5-15,000, nowhere close to half a million. Again, that shows the weakness in models constructed from normal data.

 

One thing that stands out is that BLS stated that of the 2.5 million jobs ostensibly created in May, 1.4 million were in "food services and drinking places". BLS also stated that average hourly wages fell 29 cents, which is one of the higher drops they have ever reported, even if the number sounds small. In essence what is happening is that bartenders, wait staff, and Fast Food workers got re-hired as those businesses opened, but pilots and airline mechanics, factory workers at Boeing, auto workers, etc., remain laid off.

 

One new bit of methodology that DID impact the June release was that BLS made a new definition of UE where those BLS assumed to be only laid off temporarily were not included. One could call that BLS' CV-19 adjustment. One wonders how BLS could make that assumption, but that does not necessarily mean it's wrong. Still, had they not re-defined UE, the stated rate would have been about 16.5%, even using their inadequate models.

This (below) is really what I was referring to as IMO it makes a nonsense of the word "employed".

 

To be counted as "employed", a person must have worked at least one hour during the Reference Week and have been paid. This is why even Part-time workers can be included in the 'employed' category. One hour of paid work during the week containing the 12th of the month is sufficient.

[Walker88]

1 hour ago, xylophone said:

This (below) is really what I was referring to as IMO it makes a nonsense of the word "employed".

 

To be counted as "employed", a person must have worked at least one hour during the Reference Week and have been paid. This is why even Part-time workers can be included in the 'employed' category. One hour of paid work during the week containing the 12th of the month is sufficient.

Yes, I can see what you intended. I merely used your comment as a means of further illuminating the BLS methodology and the just-released numbers.

 

Everything is usually to be taken with a grain of salt, and sometimes one needs to take the entire bag. The effect of CV-19 on employment is unprecedented, so to a considerable extent it obviates the BLS models, constructed using data from more normal times. 

 

Their economists are pretty good, but so are the economists at major investment banks whose firms have pretty good access to data via their own collection mechanisms, and who believe the real UE is much higher.  I don't know if the IB economists are better, but I do know that BLS economists work on a payscale of maybe $60-$150K, while major IB economists are paid on the order of $1million to $5million. Perhaps the IBs can draw from a wider pool of talent.

[earlinclaifornia]

7 hours ago, bkk6060 said:

All this will lead to a Trump victory in November.

It is all about the money, never forget that.

Landslide into prison cell

[Cryingdick]

8 hours ago, Eric Loh said:

This probably the best summary of Friday’s equities rise. 

The whole market is not up,” said Giorgio Caputo, a portfolio manager at J O Hambro Capital Management, who said his firm has added to stockholdings in recent months. “It’s the best of times for some firms. It’s the worst of times for other firms.”

 

Did this hedge fund manager also cry when he didn't get two birthday cakes? The entire market was up all sectors. I am aware of this because I spent all day watching it. If he means not all sectors are up year to date... that's how it works. I have 45 companies in my portfolio and 2 were down. Maybe this guy is just picking losers?

[mlmcleod]

11 hours ago, Brunolem said:

And that's not all, the report is full of "anomalies", such as:

 

According to the American Dental Association, there are just over 200,000 dentists in the US. So how surprising it must be that at a time (as a reminder the survey week was from May 10th through May 16th) when most dental offices across the US were still shuttered (and in places like California they still are), a record 245K dentist office jobs were added, effectively undoing half of all the April job losses in this job category.

 

This is probably the most highly massaged job report in History... 100% BS! 

 

ANy information coming from the Trump administration is always suspect.  Trump is not the only one in his administration that lies before reporting the truth!  

The USA is in a sad state!

 

Vote in November!

[Walker88]

As the saying goes, "If it sounds too good to be true, it probably is"

 

The BLS announced that it made a "classification error" in yesterday's release of the UE # for May. They have now corrected it from 13.3 % to 16.3%. So the number they say they should have announced yesterday was 16.3%.

 

What's that line from Trading Places? "Turn those machines back on !"

 

They also announced they made the same classification error in March and April. March's UE should have been 5.4% vice 4.4%, and April's was 19.7% versus the originally reported 14.7%.

[impulse]

11 hours ago, Eric Loh said:

This probably the best summary of Friday’s equities rise. 

The whole market is not up,” said Giorgio Caputo, a portfolio manager at J O Hambro Capital Management, who said his firm has added to stockholdings in recent months. “It’s the best of times for some firms. It’s the worst of times for other firms.”

 

An even better summary:  "We have to do something with all this stimulus cash.  May as well invest it into stocks and drive up the prices"

 

[Roadman]

The rebound of employment will be correct. 

One only has to follow the Chinese economy (first in and first out) or smaller countries to see what is happening. The rebound is real with a sudden pick up in activity for the bussiness sector. But that is for those sectors that have immediate trade availability. There are many that have not. Tourism for example is flattened world wide for some time. Its obvious that the barista on the corner cafe is back at work but the check in operator at the international airlines counter is not and will not be for some time.

Following the Chinese economy, its industrial sectors demand for raw materials was immediate and raised confidence in suppliers. That has now dropped as a lot of Chinese industry has leveled out at only two thirds of pre Covid production. 

The employment and bussiness activity pick up is expected but it is a short spike. It will flatten out to a gradual improvement but there is a long way to go to get back to pre Covid. 

[sirineou]

16 hours ago, Walker88 said:

Here's some more detailed analysis of the Bureau of Labor Statistics numbers released yesterday:

 

Total employment was 137.2 million, vs 168 million in January (when the UE rate was 3.5%). Assuming an unusual number of people did not retire permanently, the math would suggest actual UE is about 21.8%. Of the 137.2 million employed, 20.7 million are Part-time workers, and of those 10.7 million are people who would prefer Full Time but cannot find it.

 

Some of this can be accounted for by reviewing the methodology BLS uses to calculate UE. At least 9 million people who want work, but did not actively seek employment during what BLS calls the "Reference Week" (the week they use to sample data; it contains the 12th day of the month), are not counted as UE because during the week containing the 12th they did not 'make specific active efforts to seek employment' (even if quarantine restrictions prevented them from actively seeking a job).

 

To be counted as "employed", a person must have worked at least one hour during the Reference Week and have been paid. This is why even Part-time workers can be included in the 'employed' category. One hour of paid work during the week containing the 12th of the month is sufficient.

 

Of the reported employment gains, BLS reports 1.4 million of the 2.5 million reported were in "food services and drinking places".

 

The mix of employment gains as to wage level was reflected in the fact average hourly wages decreased by 29 cents in May, as many of the re-hired were in Minimum Wage jobs.

 

Productivity over the month fell by .9%, so despite the drop in wages, the cost of production increased over the month due to declines in worker productivity.

 

Adjustments were made for both March and April, where job losses for March were increased by 492,000 and in April by 150,000. This is normal as initial sampling of data is inherently inaccurate, with a Confidence Level of only 90%.

 

The BLS makes regular Seasonal Adjustments to data, depending on such things as important holidays, severe weather, or opening/closing of schools.

 

BLS often adjusts the methodology for its Seasonal Adjustments, and for the May data released 5 June one change was that it did not count those deemed to be "Temporarily Laid off" as unemployed, even though these people were not being paid and had filed for Unemployment Compensation. Had they been included in unemployed, the UE rate would be at least 3% higher than the reported number.

 

 

In addition , "Millions of furloughed workers — who, finding themselves involuntarily out of a paying job, are supposed to be classified as unemployed — appear to have mistakenly assigned themselves to the “employed but absent” bucket. As a result, the bureau believes the overall rate is actually closer to 16.3 percent. This error was present in both the May and April surveys. "

https://nymag.com/intelligencer/2020/06/unemployment-jobs-report-congress-bls.html

 

[Kelsall]

Once again, thank you President Trump!

Edited June 7, 2020 by Kelsall