April’s jobs report showing millions out of work looms large in the week ahead

A person walks at the Wall Street subway stop on April 23, 2020 in New York City.

Angela Weiss | AFP | Getty Images

Investors will focus on the slow reopening of the economy in the coming week, as Friday’s dismal April employment report is expect to paint a frightening picture of the most rapid job losses in history.

The unemployment rate is expected to jump from 4.4% to over 16.1% in April, the highest level since 1939, according to Dow Jones. Job losses are estimated to total 22 million, slightly below the entire number of jobs that were recovered since the Great Recession. 

Strategists said the market will likely be able to look past the terrible jobs number as it has done with most bad data, showing the results of a sudden and unprecedented shutdown of the economy.

“I think people are too gloomy about the unemployment situation. I think they think the unemployment rate is going to rise through the summer,” said Stephen Stanley, chief economist at Amherst Pierpont. “I think the unemployment rate probably peaks in May.”

Earnings season continues with dozens more companies reporting first-quarter results and talking about the impact of the virus and shutdowns on their businesses. So far, earnings appear to be down 12.7% in the first quarter, based on actual reports and estimates, according to Refinitiv. A diverse group of companies report, including Walt Disney, General Motors, CVS Health and Bristol-Myers Squibb.

But investors are watching the restarting of the economy, now underway at some level in many states. “If they go well that’s a good thing, but if in a week or two, you start to see some bad virus numbers, that’ll be a blow to confidence,” said Michael Schumacher, head of rate strategy at Wells Fargo. 

Best April in years

Stocks started May with a sharp decline Friday, after a 12.7% gain in the S&P 500 in April, its best month since 1987. 

Sam Stovall, CFRA chief investment strategist, said the market had been looking forward to the latest extension of fiscal stimulus, approved by Congress, and comments from the Fed, which reaffirmed after its meeting Wednesday that it will do whatever is needed to help the economy. “Now there’s not that much to look forward to,”  he said, adding the market would react negatively to any resurgence in the coronavirus outbreak.

“We had a very nice April, the best April since 1938. May is sort of a ho-hum month,” said Stovall. “It’s in the bottom half in terms of average price change, slightly below average in terms of frequency of an advance. … Just looking at last year, May tends to digest April’s gains.” The S&P 500’s April gain was its best for the month in 82 years.

Virus economy

Economists and market strategists have been tracking the progress of the virus state by state, watching hospitalization rates, new cases and recoveries for clues on how quickly the economy might be able to restart. The economy is expected to have plunged into a deep recession in the second quarter, contracting by 35% or more, after a 4.8% decline in the first quarter.

Stanley said he expects the unemployment rate to be a better-than-consensus 11.6% in April before it rises again in May. “This is all a stab in the dark,” he said.

“I think it’s not going to come down as quickly as it went up,” said Stanley. “But I do think you’re going to see steady improvement. I think you’re going to see millions of people brought back into the payrolls for several months in succession. I think we can get out of the double digits [unemployment] by the end of the summer.”

Some workers are expected to return to their company payrolls as a result of the small business-focused Paycheck Protection Program, which encourages companies to keep workers on their payroll and bring back those who were cut. But that may not show up until May or June as a factor in the jobs data, Stanley said.

Millions more are expected to have filed for unemployment claims in the week ending May 2, on top of the 30 million who filed in the previous six weeks. Economists say with such big unprecedented numbers, it is difficult to predict the unemployment rate since some people may have been temporarily unemployed and expect to return to work. 

But regardless, the number could be a shocker even though the market has shrugged off the big numbers of jobless claims and focused instead on the virus curve flattening.

“I think it could spook people,” said Schumacher. “In the markets, we’ve been watching the weekly claims, but everybody knows what unemployment is.”

Stanley said he is also watching Tuesday’s ISM nonmanufacturing data, a look at the services sector during April. A cross section of March data shows it was the services sector that took the biggest hit in the shutdowns, and it’s unclear how quickly it can recover.

“There are people who will go and do things as soon as they’re allowed to, and there are people who are going to stay home for a month or two longer,” he said. “I do think expecting we’re going to pack 100,000 people into a football stadium in September is way too optimistic.”

Stanley said some of the steep drop in consumer spending in March was the result of consumers stopping spending on health care, including elective surgery. That actually is an area that can bounce back quickly once the health care system is up and running for non virus related treatments.

A new 20-year bond

The Treasury could announce its new 20-year bond on Wednesday, when it discloses its quarterly refunding requirements, Schumacher said. He expects about $21 billion of the new 20-year to be issued in the second quarter.

The amount of Treasury debt is expected to grow in the second quarter to help fund the growing deficit, made bigger by the trillions the government is spending to combat the virus.

“The supply announcement we think is significant because you’re going to see large auction increases, not just for one month but set in motion for many months to come,” said Schumacher. He expects Treasury to announce $330 billion in notes and bonds in the refunding for the second quarter, up from $240 billion in the first quarter.

Treasury bill issuance is expected at $1.9 trillion in the second quarter but Schumacher expects that to fall to $260 billion in the third quarter. The bills were used to give the Treasury cash to pay for emergency programs and more of that debt will move to long term debt.

Week ahead calendar


Earnings: AIG, Shake Shack, Cirrus Logic, Avis Budget, Tyson Foods, Mohawk Industries, Iamgold, Texas Roadhouse, Tenet Healthcare, Skyworks Solutions, Sempra Energy

10:00 a.m. Factory orders

2:00 p.m. Senior loan officers survey


Earnings: Walt Disney Co, Allstate, DuPont, Beyond Meat, Alaska Air, Electronics Arts, Activision Blizzard, Martin Marietta Materials, Regeneron Pharma, Illinois Tool Works, Fiat Chrysler, Electronic Arts, Cheesecake Factory, Devon Energy, Thomson Reuters, Newmont Gold, Prudential Financial 

8:30 a.m. International trade

9:45 a.m. Services PMI

10:00 a.m. ISM nonmanufacturing

10:00 a.m. Chicago Fed President Charles Evans

2:00 p.m. St. Louis Fed President James Bullard


Earnings: General Motors, CVS Health, KKR, American Electric Power, Fox Corp, Grubhub, Lyft, Alexion Pharmaceuticals, Etsy, Square, BarrickGold, Genuine Parts
, Discovery, Scotts Miracle-Gro, Waste Management, Wendy’s, Jacobs Engineering, CF Industries, Twilio, TiVo, Zynga, PayPal

8:15 a.m. ADP employment


Earnings: Bristol-Myers Squibb, Anheuser-Busch InBev, Uber, Ambev, Raytheon, JetBlue, ViacomCBS, Bausch Health, AmerisourceBergen, Yelp, Becton Dickinson, Hilton Worldwide, Danaher, Gannett, Gartner, Hain Celestial, Hess, Liberty Media, Ninetnedo, Murphy Oil, NRG Energy, Yeti, Dropbox, Allscripts Health

8:30 a.m. Jobless claims

8:30 a.m.  Productivity and costs

3:00 p.m. Consumer credit


Earnings: Noble Energy, Bloomin’ Brands, Exelon, SeaWorld, Marriott Vacations, Siemens, ING, Lear

8:30 a.m. Employment

10:00 a.m. Wholesale trade

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