The SPDR S&P 500 ETF Trust (NYSE: SPY) gained 2.56% on Friday after the Labor Department reported one of the most surprising monthly jobs reports of all time. The U.S. added a record 2.5 million jobs in May, beating consensus economist estimates of an 8.3 million loss. The U.S. unemployment rate now stands at 13.3% well shy of the 20% level some analysts had feared.
Plenty of experts have weighed in on the shocking jobs report and what it means for investors.
"Now we're opening and we're opening with a bang," President Donald Trump said on Friday. "This is a rocket ship."
Trump also said the latest job numbers are “an affirmation” of the work his administration has been doing to get the economy back on track and said expert predictions about the severity of the economic impact from COVID-19 were “the greatest miscalculation in the history of business shows.”
Turning The Corner
Charlie Ripley, Senior Investment Strategist for Allianz Investment Management, said the jobs number was worthy of a double-take.
“Ultimately, this report provides additional confirmation for risk asset investors who are betting on a faster recovery of the economy,” Ripley said.
RSM Chief Economist Joseph Brusuelas said the jobs number demonstrates the Paycheck Protection Program was a success, furloughed workers were not discouraged to return to work by the extra $600 per week in unemployment payments and the Pandemic Assistance Unemployment program helped bridge the gap to normalization of the labor force.
“But this data is not aligned with the weekly jobless claims data and it will take a couple of more months to ascertain if the data is the result of seasonal issues linked to the reopening of the economy or if the weekly data proves more durable,” Brusuelas wrote.
Chris Zaccarelli, Chief Investment Officer for Independent Advisor Alliance, said the shocking jobs number overshadowed the still extremely high 13.3% unemployment rate, but it indicates the economy is headed in the right direction.
“Look for the more cyclical sectors – Financials, Industrials, Energy and Materials – to start moving higher and we could see the more interest rate-sensitive assets such as Utilities stocks and bonds sell off as a result of this news,” Zaccarelli wrote.
CNBC’s Jim Cramer said the May jobs number is evidence that the U.S. has not entered an economic Depression.
“We’re back!” Cramer said on Friday. “I think there were a lot of people who felt that the layoffs would be permanent, and it’s obvious that there’s so much demand that people have to bring people back.”
Tony Bedikian, head of global markets at Citizens Bank, said the economy is still a far cry from being back to normal.
"Barring a second surge of COVID-19, the overall U.S. economy may have turned a corner, as evidenced by the surprise job gains today, even though it still remains to be seen exactly what the new normal will look like," Bedikian said.
Eric Winograd, senior economist at AllianceBernstein, said the economy will likely continue its positive momentum as more businesses open up in June,
"To be clear: things are very far from normal in the labor market. But the pace of improvement, if sustained, suggests more reason for hope in the second half of the year than we have seen from any previous data release,” Winograd said.
Many investors have been confused and frustrated by the resiliency of the stock market given the ongoing COVID-19 outbreak. However, the stock market is a leading economic indicator, and the market strength throughout April and May was seemingly a leading indicator of potential economic strength in the second half of 2020.
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