The United States unemployment rate has been lowered to 13.3% which is a 1.4 percent decrease from where it stood in April at 14.7% as the American economy added 2.5 million jobs in May.
There had been a substantial decline in business activity and consumer confidence levels over the past couple of weeks. In fact, this has caused several prominent companies to lose billions of dollars in revenue contributing to increasing unemployment in the nation.
However, this Friday, U.S. equities performed surprisingly well including the largest technological companies like Microsoft, Alphabet, Apple, as well as Amazon which are the driving forces of the market that control over 20% of it.
These companies have a strong digital presence and are able to adapt to various changes. In fact, Amazon was able to prepare its massive online business to meet the increasing numbers of orders as customers began ordering their products online while employing 175,000 new employees.
The latest unemployment figures also contributed to a 3.15% growth on the Dow Jones Industrial Average while the S&P 500 jumped 2.6% from yesterday.
The Federal Reserve said that a large part of the unemployed population is only being laid off temporarily and are expected to return to their full-time jobs in the coming future once the travel restrictions end.
“The number of unemployed persons who reported being on temporary layoff increased about tenfold to 18.1 million in April. The number of permanent job losers increased by 544,000 to 2.0 million.” – Federal Reserve of the United States.
There are also additional reasons on why markets are continuing to improve:
The Federal Reserve had previously dropped the federal funds rate to zero which will allow businesses to borrow money from banks at a lower cost. This initiative helped to increase consumer confidence levels and also provided a relieving boost to global stock exchanges.
The Trump administration also announced a series of relief packages including a $2.3 trillion CARES Act that not only provided stimulus payments to individuals, but also grants for businesses and municipalities that were heavily impacted by the pandemic.
Several governments across the globe also executed bailout and stimulus packages to revive their respective economies and alleviate unemployment.
However, there are concerns upon whether federal assistance will get to the businesses that need it the most.
In fact, the “Main Street” lending program which is aimed to help mid-sized businesses has heard a lot of backlash from critics who say that it imposes high interest rates while requiring businesses to pay back the loans too quickly.
Companies are also expected to face curbs on stock buybacks, lower pay for its employees, as well as cuts in dividend payments which has left several industries divided.
Nevertheless, the market looks quite confident at the moment as it is in a V-shaped recovery and is expected to continue growing at a steady pace as the economy begins to open across the United States.
Hold on to your equities, saddle up and enjoy the the ride ?.