U.S. stocks ended Friday’s session sharply higher despite Labor Department data showing 20.5 million jobs were lost in April, with the unemployment rate rising to 14.7%, underscoring the depth of the impact of the COVID-19 pandemic on the American economy.
How did the benchmarks fare?
The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +0.93% rose 455.43 points, or 1.9%, to close at 24,331.32 and the S&P 500 index /zigman2/quotes/210599714/realtime SPX +0.82% gained 48.61 points, or 1.7% to end the session at 2,929.80. The Nasdaq Composite Index /zigman2/quotes/210598365/realtime COMP +0.37% advanced 141.66 points, or 1.6%, to 9,121.32
For the week, the Dow advanced 2.6%, the S&P 500 ended 3.5% higher, while the Nasdaq advanced 6%.
What drove the market?
Equity markets powered through a gantlet of grim economic data points on jobs to close Friday out with the best weekly gain in about a month.
The monthly report on the employment situation in the U.S. showed that 20.5 million jobs were eliminated last month, and the unemployment rate rocketed 14.7% from a 50-year low of only 3.5% two months ago and 4.4% last month. However, the headline number was better than some estimates for 22 million newly unemployed.
The report comes after Thursday’s weekly jobless claims data revealed that those looking for unemployment benefits increased another 3.2 million in early May — and even more if newly eligible workers who applied through a federal program are counted.
A broader measure of unemployment that includes discouraged job seekers and other people on the fringes of the labor market skyrocketed to a record 22.8%.
Although the government didn’t keep records back then, economic historians estimate unemployment peaked at 25% in 1933.
“Unfortunately, the magnitude of job losses is something that cannot be contained and total jobs lost – and potentially the unemployment rate – are likely to meet or exceed the infamous statistics from the Great Depression,” wrote Chris Zaccarelli, chief investment officer at Independent Advisor Alliance, in emailed comments.
So far, the equities market has discounted the economic weakness amid progress toward the reopening of seized-up economies in the U.S. and abroad, as restrictions imposed to limit the spread of the deadly pathogen are loosened gradually.
“While this pandemic has the potential to create economic conditions that are as bad or worse than the Great Depression, the steps that the Federal Reserve Bank has already taken, coupled with the stimulus that Washington is also providing, are the main reasons why we are unlikely to re-experience that terrible time in world history”, Zaccarelli said.
Another reason analysts have pointed to for why investors are shrugging off the brutal jobs report is that 18 million of the 20.5 millions jobs lost were classified by employers as “temporary.”