Stocks are rising Thursday after a report showed the U.S. job market continues to climb out of the crater created by the coronavirus pandemic.
The U.S. government said employers added 4.8 million jobs to their payrolls in June for the second straight month of growth. The unemployment rate remains very high at 11.1%, but last month’s improvement was much better than economists expected.
The pandemic has made collecting data on the economy unusually difficult, which leaves economists uncertain about the numbers’ accuracy. But they say it’s clear that the job market is improving after collapsing in the spring amid widespread shutdowns. That bolsters investors’ hopes that the economy can recover from its recession relatively quickly as governments relax restrictions.
Such hopes have lifted the S&P 500 to within roughly 7% of the record set in February, after an earlier nearly 34% drop when recession worries peaked.
“We’re starting to see the real economic data say, ‘Yes, the recovery is here, and it’s real,'” said Brad McMillan, chief investment officer for Commonwealth Financial Network.
The next step, he said, is to see the job gains translate into lasting growth for workers’ incomes and for how much they spend.
Worries about the virus are still hanging around, though, as the number of reported cases in the U.S. rises.
Many workers across the country are still experiencing economic pain, with only about a third of the 22 million jobs lost to the recession recovered so far. And worries are rising that worsening levels of infections in not just Florida but across swaths of the U.S. South and West could choke off the budding economic improvements. Such concerns have held the market in check since early June following a months-long rocket ride.
In a research note Thursday, CIBC Capital Markets senior economist Andrew Grantham said “it will be much slower, harder going from here.”
“With Covid-19 case counts rising again in parts of the country, leading to the delaying/reversing of reopening plans, high-frequency employment data already show a stall in the prior improving trend towards the end of June,” he wrote.
Even if case counts ease again, growth will remain “sluggish” until there’s a vaccine or effective treatment allowing other industries to fully reopen, Grantham said.
Thursday’s reports on the economy also weren’t uniformly encouraging. The number of workers filing for unemployment benefits last week dipped by less than economists expected, for example. The number of workers continuing to get jobless claims was also higher than expected.