A June rally roared on Wall Street on Wednesday as private employers reported that job losses stabilized in May, raising hopes among investors and in Washington that the recovery from the coronavirus shutdown could be faster and stronger than predicted.
The Dow Jones Industrial Average gained 527 points, or 2%, to close at 26,269. That was more than 8,000 points above the index’s low point in March, when the COVID-19 pandemic was forcing businesses to close and throwing more than 40 million Americans out of work.
The Nasdaq Composite Index gained 0.7%, closing less than 1% below its record high on Feb. 19. The index has climbed more than 42% since its low point on March 23.
Investors were buoyed by optimism about states reopening from the shutdown and by a report from the payroll firm ADP estimating that U.S. private-sector jobs fell by about 2.8 million from April to May. That was significantly better than projections of about 9 million and well below the previous month’s record number of nearly 20 million.
President Trump pointed to the “booming” stock market rally as more proof that the economy will bounce back significantly before Election Day in November.
“I built this great economy, and I’m building it again,” Mr. Trump told Fox News radio host Brian Kilmeade. “By the time of the election, I believe the economy will be doing phenomenal numbers. Big job increases, big GDP increases, and that’ll be before the election.”
The transportation sector, which stands to benefit more than most others from the economy’s reopening, led the rally. Shares of American, Delta and United airlines all gained at least 5.9%.
White House senior adviser Kevin Hassett said the jobs report could mean the economy is recovering faster than expected after the coronavirus-related lockdowns.
“This ADP report is a real positive sign, and it’s such a positive sign that I really have to grab my pencil and go back to my desk and see what’s going on. … It’s way lower than I expected, in a good way,” Mr. Hassett said on Fox Business. “We’re getting close to the bottom, for sure. The number is so good — it’s such good news — that I really have to dig deep into it and see if there’s not something funny going on.”
More than 40 million unemployment claims have been filed since the pandemic took hold in March. Mr. Hassett said some projections have the gross domestic product contracting by 50% in the second quarter.
“If you look at the states that have been opening up, then you can see that they are really getting back to normal quickly,” he said. “I do think that we’re going to see bottom. I was expecting June, but this ADP number does suggest that you’re very, very close to a turning point.”
The Labor Department is due to release its unemployment figures for May on Friday morning.
Joel Naroff, president of Naroff Economic Advisers in Holland, Pennsylvania, cautioned that the May unemployment rate is likely to be about 20% and that some indicators point to more job losses this month.
“I am not sure that will be the peak [of unemployment],” Mr. Naroff said in his report Wednesday. “We can open up the economy all we want, but if there is double-digit unemployment for an extended period, consumer spending levels will not be able to come close to where they had been. Will investors recognize that? Got me.”
Consumer spending accounts for about two-thirds of economic activity.
A report Wednesday from the Institute for Supply Management showed service providers began to emerge from the shutdown in May. Its non-manufacturing index rose 3.6 points, the most in more than two years, to 45.4, but the reading below 50 showed that most service-related industries were still contracting.
ADP said the job losses in May hit small, medium and large businesses alike.
“The impact of the COVID-19 crisis continues to weigh on businesses of all sizes,” Ahu Yildirmaz, co-head of the ADP Research Institute, said in a statement. “While the labor market is still reeling from the effects of the pandemic, job loss likely peaked in April, as many states have begun a phased reopening of businesses.”
Conservative economist Stephen Moore, who advised the Trump campaign in 2016, said the stock market is engaging in “premature exuberance.” He said he is still predicting a “really bad summer” of business failures and a difficult job market.
“I’m just not as bullish about the economy as the investment markets are,” he said, adding that House Speaker Nancy Pelosi, California Democrat, isn’t likely to agree with Senate Republicans to “anything that helps the economy.”
The House has approved a $3 trillion economic relief package, including expanded unemployment benefits and hundreds of billions of dollars in aid for states and cities. Senate Majority Leader Mitch McConnell, Kentucky Republican, said last week that the Senate will consider another bill in about a month and it would be “narrowly crafted” compared with the House proposal.
Mr. Moore said any compromise on the House bill “is bad for the economy.” He said the employment benefit program approved in March, with a $600 weekly federal payment on top of state benefits, is giving people too much incentive to stay home.
“We’d be much better off just doing nothing,” Mr. Moore said. “The thing that needs to happen now is just go back to the old employment benefit program … and then the payroll tax cut. You do those two things, and you get some real juice in the economy. People really underestimate how much damage we’ve done to the economic infrastructure of the country, and I think it could take a long time to recover. I can’t see this [stock] market staying at this level.”
White House advisers note that unemployment rates were at historic lows for all groups before the pandemic hit the U.S., with a national jobless rate of 3.5% in February.
White House Domestic Policy Adviser Brooke Rollins said the U.S. was experiencing “unprecedented prosperity,” including the lowest jobless rates in a half century for blacks and Hispanics.
“To get all of that back is really a priority,” she said this week in a forum hosted by Politico.
She said the payroll tax cut is needed but the president isn’t necessarily opposed to another round of significant relief spending.
“He is not in the typical Republican ’box,’” she said. “He will do what he believes is right for the country. The long-term health of the country is at the top of the president’s mind.”
Mr. Moore expects the unemployment rate to be around 10% by Election Day, but he said the president could benefit “if the direction is good.” He also sees two “silver linings” to the rioting that has roiled the nation for the past week that could help the president and hurt presumptive Democratic nominee Joseph R. Biden.
“The lockdown lockdown is over now,” Mr. Moore said. “And No. 2 is, it’s increased Trump’s odds of getting reelected because the left has exposed how radical they are. That’s good for markets because the markets obviously want Trump over Biden.”
• Dave Boyer can be reached at dboyer@washingtontimes.com.
• David Sherfinski can be reached at dsherfinski@washingtontimes.com.
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