Dividends and Virus casts doubt on US job growth surge

At the start of the month, President Trump had a press conference to talk about the job growth, but he tended to leave out things, because he is known as a cheerleader. There is nothing wrong with a cheerleader, except for they are on the sidelines and rarely know or understand what the team is trying to do on the field. The cheerleaders hope for success and have simple messages – Defense, Go Team Go, Smoke em, all good things to say but they do not focus on execution of the plays.

In an article by Lucia Mutikani of Reuters, the US economy created jobs at record pace but still 31.5 million were collecting unemployment cheques. The stimulus package has given extra money to those unemployed but is scheduled to stop at the end of July. What will happen to those unemployed if the stimulus package is not extend?

Non-farm payrolls surged by 4.8 million jobs in June, many people were recalled from work. Payrolls rebounded 2.699 million in May after a historic plunge of 20.787 million. Economists polled by Reuters were expecting 3 million jobs, so the 4.8 was wonderful.

Hiring in June was boosted by the typically low paying leisure and hospitality industry which brought in 2.1 million accounting for 2/5’s of the rise in payrolls. However average wages were down 1.2% and average hours worked was down from 34.7 to 34.5 hours.

Jobs in state governments began to decrease as states have less tax revenues and stressed budgets.

Some economists were attributing the burst in employment to the rules of the Paycheck Protection Program, businesses that were given loans can be partly forgiven if used for wages. Those funds are drying up and those businesses with weak demand will be laying off workers.

Most economists polled by Reuters said they need more data to get a better view of the labor market.

Linking to dividend paying stocks, when COVID meant governments had to shut down parts of the economy for social distancing, some industries benefited and some did not. That is a normal part of the cycle for any outside threat. As the months have gone, confidence to go back to normal while there is desire to, the general public is not doing it. If you read about stay vacations and trying to go to relative remote areas to avoid people to have a vacation, it does seem some industries benefit and others simply do not. As long as you have move money from one sector to the other, you are fine. If not watch the debt and cash flow for the restructurings that will be coming soon.

There are more questions than answers, till the next time – to raising questions.

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