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COVID-19: Unemployment Surges as Reports Indicate Dip in Job growth

Hundreds of people line up outside a Kentucky Career Center hoping to find assistance with their unemployment claim in Frankfort, Kentucky, U.S., June 18, 2020. /Reuters

The NASDAQ (National Association of Securities Dealers Automated Quotations) stock market’s data highlighted a sharp slowdown in the employment growth of the United States. This brought upon worry in the investors that the Congress won’t be able to bring about another fiscal stimulus to save the economy from the COVID-19 induced pandemic.

The S&P index fell down 1.5% from its record high. Stocks of tech companies which also recorded a record low and took the index down by 1% more. The only positive signs came from a defensive sector and real estate.

The labor department has been keeping close eyes on the employment report. As it came out the democrats and the top acumen to the President struggled to negotiate a fiscal. Trump also threatened to bypass Congress with an executive order.

The report showed that nonfarm payrolls increased by 1.76 million in July. It was previously estimated to go up by 4.8 million in the previous month. Government employment rose only 1.462 million, excluding the employments those were done artificially like local and state government education, and temporary hiring for the 2020 Census. It had risen about 4.737 million in June. The economy shows that only 9.3 million jobs of the 22 million lost jobs during February and April was regained.

US job growth stat chart by Bureau of Labor statistics
US job growth stat chart by Bureau of Labor statistics.

High unemployment due to racial discrimination seems to prevail as blacks continue to experience high unemployment. Racial discrimination seems to be the main focal point or theme of the upcoming elections.

Reuters reported comments of Sarah House, a senior economist at Wells Fargo Securities in Charlotte, North Carolina, saying, “The initial bounce from widespread re-openings is now behind us. Further improvement will occur in fits and starts and depends on the course of the virus.”

The West and South America were forced to shut down businesses again due to pandemic and the number of coronavirus affected people still keeps on rising.

However, it was foreseen by economists that the figure would be much lower in July. The economists say that this would put pressure off from Congress. There have already been weeks of argue over the employment relief bill where the main contradiction is pointed to continuing the $600 per week in unemployment benefits.

President Trump’s office rejected the Democrat’s idea on Friday. The democrats were offering to take $ 1 trillion off the COVID-19 help package only if the Republicans would add to the offer. With no agreement from both parties, the round also ended without a deal.

Chuck Schumer, the US Senate Democratic leader labeled the meeting with the Republicans disappointing. The House Speaker Nancy Pelosi informed us that with differences between the two parties still at large, any agreement still seemed unlikely.

Mike Zigmont, head of Trading at Harvest Volatility Management in New York commented on the matter, saying, “The bottom line reality is that unemployment is through the roof with respect to historical averages, we are still in a pandemic with no cure and the politicians have promised another $1 trillion or more to the American public”. He also added to his statement that not delivering the promised aid by the politicians would be would result in their political suicide.

The S&P 500 value index went up, while the S&P 500 growth index fell. 0.19% increase was also seen in Dow Jones industrial average value as it increased by 57.17 points to 27,438.15. In case if the S&P 500, 0.07% was added as the stock added 2.23 points to 3,351.39. The Nasdaq composite went down by 97.09 points, or 0.87%, to 11,010.98.

This decline came after a seven-session streak of Nasdaq gains. Dow and S&P also rose for five straight days before the sudden slow down.

82% of the companies listed in the S&P 500 have reported ending above the foreseen estimates. The second-quarter corporate earnings season has mostly passed. The highest recorded result showed their earnings land 22.5% above expectations.

T-Mobile US brought in a record amount of subscribers which made them topple AT&T out of the second position and take the spot as the second-largest US wireless provider. This made the stock of the T-Mobile US leap and was the most profitable stock in the S&P communication services index.

Due to several precautions and restrictions in travel had made Uber suffer during the pandemic. It produced a report that showed it had slightly gone better from the second quarter. This was just a marginal betterment of the company and the long term results are yet to be seen. However, the company’s food – delivery segment saw double amounts of orders in these times.

Chris Rupkey, the chief economist at MUFG in New York, said about the current situation that with job recovery being on a shaky ground and without any protection from the government allocated stimulus the economy “could be in for a very bumpy ride”. He also added that if the country has to carry on “with the crushing weight of massive unemployment” any sustainable economic growth is not possible for the country.

With Trump adding to problems, as on Thursday, he put up bans in US transactions with TikTok and WeChat. The companies suffering the bans though claim that they have complied with all US laws. The Chinese companies also threatened the US Government that they will have to face consequences of their action.

Economic Times reported about King Lip, chief investment strategist at Baker Avenue Asset Management in San Francisco,  who said that with this volatile situation between the two countries, investors are worried about China’s “potential retaliation” against US actions.

The applications against whom the actions taken were WeChat and TikTok. WeChat is owned by Chinese conglomerate Tencent Holdings Ltd. Their sister company which was launched in 2018 called Tencent Music Entertainment Group, which is listed in New York reported a fall in the market. However, Facebook reported having an increase in stock price.

Microsoft, who is in talks to buy TikTok from its Chinese owners ByteDance also reported a decline. Price of all US-listed Chinese companies like Baidu Inc, Alibaba Group Holding and JD.com Inc also dropped.

Reuters reported that the $600 weekly unemployment benefit supplement, which made up 20% of personal income, expired last Friday. It would be beneficial for both US citizens and US economy if the government can agree on the stimulus package as soon as possible.

 

 

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