Weekly Market Commentary June 10 2020

The Markets

The employment report electrified stock markets last week.

North American stock markets responded enthusiastically to the news that unemployment levels were lower than expected, though still far from pre-pandemic numbers. While we are still facing double-digit unemployment, analysts had expected unemployment to increase during the month of May, but instead 250,000 more Canadians were working in May than the previous month.

There were some caveats.

For one, while the numbers are unexpectedly positive, unemployment is still very high, and the damage done to global economies by the coronavirus pandemic will take time to undo, even if everyone returns to employment immediately.

Second, there is more than one measure of unemployment. Common measures of unemployment do not include underemployment – people who are not working as much as they would like to be – and discouraged workers, those who are no longer actively seeking employment.

The BLS wrote the improvement in unemployment reflected, “…a limited resumption of economic activity that had been curtailed in March and April due to the coronavirus pandemic and efforts to contain it.” The biggest job gains were in leisure and hospitality, construction, education and health services, and retail trade.

The lower month-to-month numbers may be a sign that government initiatives to subsidize wages for small businesses worked:

“…give some credit to the government relief efforts, especially the [PPP] (the U.S. equivalent wage subsidization program), for bringing back jobs. The program gave relief to small businesses…through loans that would not have to be paid back if most of the money went to rehire and pay employees. PPP money had to be used right away, and a lot of it started hitting small businesses’ bank accounts in late April and early May, which ended up triggering a net gain of 2.5 million jobs in May,” reported Heather Long of The Washington Post.

Eurozone stocks rallied last week, too, after the European Central Bank increased its quantitative easing program and extended support to June 2021, reported Dhara Ranasinghe and Yoruk Bahceli of Reuters.

Major stock indices and treasury yields finished the week higher.

Source: Refinitiv

Necessity is the mother of invention

The silver lining of the coronavirus cloud may be innovation. From healthcare to retail, people and companies have been identifying problems and finding ways to solve them:

• How much toilet paper is enough toilet paper? As consumers cleared shelves of toilet paper, a company in Germany developed a toilet paper calculator to help determine how much is enough. “A person with a stockpile of 10 rolls, who uses the typical amount of paper three times a day, should survive for 53 days…39 days longer than the recommended 14-day quarantine for those with symptoms,” reported Reuters.
  
  
• Ingenious respirator solutions. Early in the crisis a dearth of respirators handicapped healthcare workers’ ability to support patients with serious cases of the coronavirus. Many companies developed alternatives. One company, “…built a simple but effective ventilator from a windshield wiper motor and a pliable [hand-operated resuscitator],” reported Eric Haseltine in Psychology Today.
  
  
• Where’s Waldo’s fever? An artificial intelligence firm that creates tools to detect threats of violence revamped its analytics software so thermal cameras can measure the temperature of a person’s forehead and send out an alarm when a fever is detected.
  
  
• Gear ‘Q’ would have loved. A California company held a month-long contest, asking participants to suggest practical devices for a coronavirus-infected world. Entries “…poured in, including a wrist-mounted disinfectant sprayer, half gloves for knuckle-pushing of buttons and a device that lets you open car doors without touching the handle, aimed at cab users,” reported Reuters.

Weekly Focus – Think About It

“A rock pile ceases to be a rock pile the moment a single man contemplates it, bearing within him the image of a cathedral.”

--Antoine de Saint-Exupéry, writer and poet

Best regards,