Don't Be Fooled by Stocks. The Economy Needs More Aid.
Even though employers unexpectedly added jobs in May, the percentage of unemployed not on temporary layoff surged.
The economy unexpectedly added jobs in May.
Photographer: Tim Boyle/Getty Images
The strength of the rally in equity markets the last couple of months coupled with the unexpected rebound in May jobs might make it a little too easy to conclude that the U.S. economy doesn’t need more stimulus. It’s more likely, though, that market participants assume more stimulus is coming – as it should.
The benchmark S&P 500 Index has gained 42.8% from its low on March 23, leaving it down just 1.14% for the year amid what the International Monetary Fund says will be the worst recession since the Great Depression. The foundations of the rally are straightforward. The Federal Reserve’s rapid response to the pandemic-induced shutdown of the economy effectively removed the risk of a financial crisis, while Congress pumped money into households and firms via a variety of fiscal support packages. Government data show personal incomes surged 10.5% in April even as wages and salaries fell by 8%.