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The Bull Is Back! Markets Charge As Economy Lags


  • A look at the raw numbers from the BLS.
  • While the market rallied sharply on Friday due to the “better than expected” number, investors may be getting too far ahead of themselves in the short-term.
  • What the market does care about, ultimately, is earnings.

A Note About That Jobs Number

On Friday, the Bureau Of Labor Statistics released the widely expected employment report for May. Despite continued weekly jobless claims over the last month exceeding more than 8-million, the BLS reported an increase of more than 2.5 million jobs in May. The unemployment rate came in at just 13.3% well below the consensus estimates of 17-19%.

Both of these numbers were historical records surpassing any period back to the “Great Depression.”

Let’s start by taking a look at the raw numbers from the BLS.

From May 2019 to May 2020:

  • The civilian population grew by just 1.186 million. (This is a historically slow growth rate for the population which speaks to the demographic problem.)
  • The labor force shrank by 4.555 million. (We assume these people no longer want to work.)
  • The number of employed individuals fell by 19.602 million.
  • The number of unemployed persons rose by 15,047 million.

Again, these are numbers never before seen in history.

Importantly, the drop in the unemployment rate is due specifically to the substantial drop in the labor force. Since February, 6.3 million people have decided they no longer wanted to work, according to the BLS. Such is substantially more than would be expected even based on the large increase in unemployment.

Therefore, if we adjust for the labor force, and count the extra 4.9 million people who were “not at work for other reasons,” the “realistic unemployment rate” was 17.1 percent in May.

While that number is down from April, it is still higher than any other unemployment rate in over 70 years. (But the 13.3% number was as well.)

BLS Admits Error And Confirms The Math

From the BLS:

“There were also a large number of workers who were classified as employed but absent

This article was written by

Lance Roberts profile picture

After having been in the investing world for more than 25 years from private banking and investment management to private and venture capital; I have pretty much "been there and done that" at one point or another. I am currently a partner at RIA Advisors in Houston, Texas.

The majority of my time is spent analyzing, researching and writing commentary about investing, investor psychology and macro-views of the markets and the economy. My thoughts are not generally mainstream and are often contrarian in nature but I try an use a common sense approach, clear explanations and my “real world” experience in the process.

I am a managing partner of RIA Pro, a weekly subscriber based-newsletter that is distributed to individual and professional investors nationwide. The newsletter covers economic, political and market topics as they relate to your money and life.

I also write a daily blog which is read by thousands nationwide from individuals to professionals at www.realinvestmentadvice.com.

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Comments (85)

dalmond profile picture
@Lance Roberts
Wait a sec -- the equity market is forward looking, by 3-6-9 months, or whatever. Has not all this re-opening, increased shipping, etc. not been priced in already. Why would the market rally on 'yesterday's news'?
Bingo! You got it @dalmond ! The market is looking into 2021. Today is meaningless although the market has its feelers out all day to see where the rubber meets the asphalt.
hawkeyec profile picture
I don't know what all the numbers are saying, but just driving around a bit I saw many storefronts open in Feb that were totally empty today, as in no fixtures, nothing. Many were places I normally patronized. Not just restaurants, but a variety of different stores, salons (most still not reopened in KC) and other common shops. Several iconic and formerly top-rated establishments are also giving up the fight, even in high traffic locations.
I don't drive around so I'll take your word for it @hawkeyec .
I was just out touring today hawkeye and I noticed the same thing. For sale signs everywhere. For lease and for rent signs as well. There was a large number of businesses that were already empty shells. I was kind of puzzled by that since it means there was workers busy emptying out those buildings and stripping off signage during the lock down.
Gotta hand it to the millennials; they have powered the markets into orbit even in the face of catastrophic economical dynamics. NASDAQ breaking all-time highs daily! S&P now UP for the year! DOW closing in on pre-Covid levels. In 30 years of trading I have never seen the markets make such an obscene joke of evaluations; even worse in my opinion than the .com bubble, although that was pretty grotesque too! You just have to know the Wall St. Cabal is sitting back & licking their chops to flip the switch on this crazy party.
arthur_bishop1972 profile picture
Millennials are responsible for this rocket ride?!?!??? Please tell me you don't really believe that, esp with "30 years of trading" under your belt.
dalmond profile picture
Yeah, that's my opinion too. Price discovery is gone.
Good point Arthur. What we are being led to believe is that the muppets are authoritatively leading the market higher. That they have total control. And now its the seasoned professionals on the ropes as the indices soar over their heads and they are forced to cover in the face of the brilliance of the teeny boppers. LOL
Value Digger profile picture
@Lance Roberts "Such was seen in Friday’s employment report FIASCO."

Excellent said.
Value Digger profile picture
According to a recent survey by the Conference Board below, many human resource executives at large companies say their organizations plan on laying off workers in the coming months as they see the impact of the crisis on their business:


In other words, layoffs are far from over.
Value Digger profile picture
Unlike many complacent and grossly incompetent fund managers, there is a reason why Warren Buffett is staying on the sidelines.

Specifically, unemployment rate is at a historically high 13.3% today versus 3.5% in Q4 2019.

However, SPY is today where it was in Q4 2019.

In other words, the big disconnect between valuations and fundamentals in Q4 2019 has become tremendous in Q2 2020...
A tremendous gap between the markets and reality. How long can the markets remain irrational for @Value Digger ?
arthur_bishop1972 profile picture
@Value Digger If those layoffs result in businesses being leaner and more profitable, the market will go UP further-not down.
This is a CNBC special bulletin. There is an extinct event asteroid on a collision course with Earth. A 100% probability of impact. In other news, the DOW Jones skyrocketed 2000 points on the news in anticipation of the humanity reboot trade.....
Sell your stocks and party. You have 19 minutes to impact @Anarchy99 . The diameter of the asteroid is only 12 miles, just 6 miles longer than the one that struck the earth 66 million years ago and wiped out 75% of all life including the land roving dinosaurs. The winged dinosaurs survived know to us as birds.
What is the unemployment rate in the loot and burn zones?
Your lifetime effort destroyed!


arthur_bishop1972 profile picture
TaKe it somewhere else, sKare-dee-Kat.
The big cap locks comment just above your comment is quite ugly @arthur_bishop1972 .
arthur_bishop1972 profile picture
@kimbillro It doesn't belong here-no.
rod_s profile picture
Does the market care about earnings though?
Not with FANG stocks. They get a free pass @rod_s .
At what point do we call this inflation?
The simple answer is that we don't yet.
I don't know what in hell we call this but I am throwing in the towel on trying to sell any kind of corrective decline. Nothing has been able to stop this market. NUTTING. Every resistance level imaginable has been broken. One after another. Like drunken bowling pins getting knocked down in the gutter. Even dirty lies about employment numbers send it further skyward.

There is no coin in trading based on historical chart behaviour.

This stock market is a different kind of animal altogether.
End of quarter window dressing by institutions could suck this market higher into an end of June apex. Then short it if you can see any cracks in its armor @PM Analyst . By then VIX might be below 15 making buying puts reasonable.
JamesSutton profile picture
How many of the unemployed are in prison? Does the BLS data account for that?
That is very good question.
Diesel profile picture
We could have 90% unemployment and the market would still rally. Powell and Trump will do whatever it takes to pump SPY to 400 by election day.
Agreed @Diesel .
geoffgw profile picture
Very well written and insightful Lance. I have been selling as swiftly as I can the last 7-10 days, made it to 40% cash and 10% bonds and trimming down the winners and dumping some losers, hope to do more this week and see where we are
arthur_bishop1972 profile picture
Just be ready to get back in FAST b/c any dip will be bot up QUICK.
Another conundrum. I'm sticking with an intermediate top by the end of June.
Salute to the people who are spending time in writing articles with charts, bars, and all fancy tools to explain and rationalize insane market behavior which is totally disassociated from reality
Agreed Bazooka Joe Bubble Gum @baz00ka .
Jhalgren profile picture
Despite your caution, it seems your choices to invest in CVC, transportation, are premature. But agree that bonds are foolishly oversold! Best and safe to all from a market and health view too!
If the economy continues to improve, won't yields rise/bond prices fall? Tough call.
I think gold fell because of rising long term yields.
NervousNeville profile picture
Bonds look terrible to me unless they're short term bonds. When I can get almost as much yield in a money market fund?
The markets are doing what they are supposed to do which is to front run the economy.
Chart_Browser profile picture
Election year .... party in control throws money at any weakness to keep voters happy.
Next year .... we've got a debt problem. Free money handouts end.
Equity markets .... :-(
That's next year when a real bear market begins.
Lance - you say "Timing the market is an impossible endeavor." But, yet, in your wrap-up, adding to e.g. utilities and transportation, switching to bonds, which are "oversold", it seems to me you are doing precisely that.
Timing is everything.
arthur_bishop1972 profile picture
Gotta learn to think (and invest) for yourself.
It's the ride .. Not the destination.

$SPX 2193 to 3193 in 50ish trading days. Crazy! We've got another 12% - 17% upside left in the tank. It's the Mungo Jerry season - We can reach right up and touch the sky 🎶 We're back. Nowhere but up. LET'S RIDE. We take out the highs. Everybody makes bank. $SPX is 3600 or 3700. NBA is back. Another Ring for the King! Doesn't get any better! How does it end? I mean we're all Rich - Right? Who cares about the Economy. Or the Employment Numbers? Or that Virus .. What was the name of that Flu Bug? Anyway Fauci's done whodooed us. And the Election - Who cares who's running the the Country. The Market only goes up. We've made so many bucks that Nothing can stop us now.

Man .. this Stock Market thing. It's so Easy. What a Ride...
That was easy.
Jhalgren profile picture
What country do you live in? I sense a disruptor.
@kimbillro @Jhalgren In times like these I like to quote that great orator - Judge Smails
"It's easy to grin When your ship comes in. And you've got the stock market beat".
Can you say Bull Trap?
perplexedtex profile picture
Glad I didn't wait on Lance to tell me the Bull was Back. Instead I bought 3 airlines, 3 cruise lines and 10 fast food retailers with drive through windows. And I did it 8 weeks ago.
They're coming back to life.
Jhalgren profile picture
Good luck when the second wave hits: patience is key!
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