Monthly Economic Update
For the month ending April 30, 2020
The coronavirus pandemic has caused the most severe global recession in history as more than a third of the world’s population has been placed in lockdown to help stop the spread of the virus. March data on the economy only partially reflected the crisis in the U.S. as many states and cities started shutting down their economies in mid- to late March. However, data from April is more telling about the extent of the pandemic’s economic toll.
The recession has been characterized by an unprecedented, sudden unemployment crisis as non-essential businesses have been forced to shut down and furlough their employees. The Labor Department’s April jobs report reveals that the economy lost more than 20.5 million jobs in April, causing the unemployment rate to soar to 14.7 percent, the highest rate in the history of the statistic. The worst unemployment crisis since the Great Depression followed a 50-year low in the unemployment rate—3.5 percent—seen in February of this year. As bad as the jobs report numbers are, they most certainly understate the economic devastation. The statistics are based on surveys of businesses and households taken in mid-April,
and the economic crisis was probably worse later in the month. Additionally, millions of workers who were absent from work for unspecified reasons were counted as employed, and the statistic only counts unemployed people who are actively looking for work. It is likely that many workers have given up job hunting as they are encouraged to stay home during shutdown orders or believe there are no jobs to be had.
Even as the Labor Department just reported the worst jobs report ever, the stock market is doing fine. While investors reacted big time in the early stages of the pandemic, hitting a low point in March, stock prices have been climbing back up. While not at the record highs seen in February, the S&P 500 is close to where it was last fall. The bleak jobs report is not surprising.
Investors anticipated a bleak jobs report and have already reacted to it. The stock market is sometimes considered a leading indicator of where the economy is headed. Investors now think that the economy will be better in the coming months. States have started reopening, and people are hopeful for a treatment for the virus.
While the stock market is doing okay right now, the near future is far from certain. The reopening of the economy could bring a resurgence in the virus. Warm weather may help contain the spread of the virus through the summer, but cooler fall and winter temperatures may bring another surge in infections. If businesses are forced to shut down again, investors may respond as they did in the beginning of the pandemic, setting the stock market plummeting once again.