Trust & Investments News
As the Covid-19 pandemic has evolved the past few weeks, we have seen an economic ripple effect that has had an impact on the lives of every American. The First Dakota Trust & Investments team values the opportunity to assist you through these challenging times. We feel strongly this event does not have to be a “lasting impact” rather a “short-term influence” as long as consistent, disciplined investment decisions are applied to your financial future. Call us if we can help.
The CARES Act is a 2 trillion dollar coronavirus economic stimulus bill that President Trump signed into law on March 27, 2020. It is designed to offer relief for businesses, families, and individuals who have been negatively impacted by COVID-19. From direct payments to unemployment to student loan relief and more, the bill is aimed at combating the economic ramifications of the coronavirus. Let’s take a closer look at some of the highlights here.
Get a new financial outlook.
The Outlooks newsletter explores financial news and trends that could affect trusts and investments. With a threefold focus on economic, equity and fixed income forecasts, each issue highlights positive takeaways, potential negative warning signs, and unknowns.
June 2020 Outlook
Since the beginning of the coronavirus-related lockdowns, economists have predicted that the Bureau of Labor Statistics payroll report for May would show the ugliest data in the past 80 years. Instead, what we actually witnessed was one of the greatest head-scratchers of all time. Rather than reporting an expected loss of 7.5 million jobs, the economy actually gained more than 2.5 million jobs. In a month where the unemployment rate had been expected to touch 20%, it actually improved from 14.7% in April, down to 13.3% in May. This improvement wasn’t due to unemployed individuals leaving the work force because the participation rate climbed higher. All of this seemed to catch the financial industry off guard.
Over the past seven weeks, nearly 33.5 million Americans have filed for unemployment benefits, representing more than one in five of the overall working population. So if you’re wondering how the May non-farm payroll report only shows a loss of 20.5 million jobs and an unemployment rate of 14.7%, you’re probably not alone. The answer is two-fold, it’s an issue of timing and classification. The survey that is conducted by the Bureau of Labor Statistics (BLS) occurs during the calendar week that contains the 12th day of the month. When considering that more than seven million people filed for unemployment benefits after the week of April 12, that helps narrow the gap. Additionally, as noted in the BLS report, there was also a large increase in the number of workers who were classified as employed but absent from work because employers whose business were closed due to coronavirus failed to classify them as unemployed on temporary layoff. Regardless of the details and the official totals, with so many individuals unemployed it’s fair to think that as soon as companies begin rehiring, prospective employees will be knocking down their doors. Unfortunately, that may not be the case. After receiving their first unemployment benefit payment, a statistical majority of the newly unemployed will be pleasantly surprised that their income for remaining at home is now more than it was when they were working.
Since the majority of economic data is presented on a lagged basis (i.e., March data usually represents February information), many economic releases throughout March have been more or less dismissed by the investment community. This is because markets tend to look toward the future, and we now live in a world of economic data that’s “pre-coronavirus” (before mid-March and the spread of the virus in the United States) and “post-coronavirus” (after mid-March, when “shelter-in-place” and “essential activity only” contagion mitigation efforts were put into effect). The difference between most “pre” and “post” economic data points are expected to be staggering.
Since our last Economic Outlook, the novel coronavirus has spread beyond the borders of mainland China. It now has a solid foothold in South Korea, Italy and Iran, with a smaller representation in many other countries. This development has triggered a significant volatility shock throughout all asset classes of global markets, starting in mid-February. In fact, the only thing that seems to be spreading at a faster rate than the virus is the overall fear and underlying economic uncertainty it’s causing.
This material has been prepared for information purposes only. Factual materials obtained from sources believed to be reliable but cannot be guaranteed.
Please note: securities are not insured by the FDIC or any other bank insurance, are not deposits or obligations of the bank, and are subject to risks, including the possible loss of principal.