The May USA The unemployment rate dropped to 13.3% and employers have created 2.5 million jobs, the first signs that the labor market is improving after the coronavirus pandemic closed parts of the economy almost three months ago.
“These improvements in the labor market reflected a limited resumption of economic activity that had been curbed in March and April due to the coronavirus pandemic (COVID-19) and efforts to curb it,” the Department of Labor said on Friday in a press release.
Josh here – this 13.3% rate for May is an improvement over the 14.7% rate in April. Of the 22 million jobs lost in March and April, we recovered just over 10% last month as the states slowly reopened.
Some details on the reaction of the bond market via Peter Boockvar:
Treasuries are smashed with an increase in 10-year yield by 12 basis points to 0.95%, an increase of 40 basis points over the week. What does all of this mean for the Fed now? Do we really need all their generosity when the economy recovers on its own? The 10-year inflation threshold rose by 5 basis points to 1.26%, which is just below the highest level since the beginning of March.
The curve is getting steeper, which is good for lending and market psychology, and presumably for bank stocks.
Here’s a quick look at the 10-year / 3-month and 10-year / 2-year yield curves for government bonds:
You can see a big improvement over the inversions that took place in the last week of February, when the recession became apparent to market participants. In absolute terms, a 10-year yield below 1% does not strengthen the economy, but has doubled from the lows of early March when it was 0.49%.
The state of New York did not record any deaths from COVID-19 yesterday. None.
All of this is encouraging news. The stock exchange has obviously been pushing it for weeks, that’s how it should work. Too much? We will see.
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