Daily Outlook

Dow Futures Soar But Don’t Forget To Zoom Out And Look At The Big Picture

All eyes are on today’s double-whammy jobs report. Beyond Thursday’s usual jobless claims data, we’ll also get the monthly Labor Department employment report. We’re expecting record numbers, which may explain why Dow Jones Industrial Average (DJIA) futures are up 225 points this morning.

The Labor Department report is expected to reveal a record 3 million new jobs created in June. That’s the most since records began in 1939. But Jonathan Golub at Credit Suisse warned investors to take these ‘record’ numbers with a grain of salt.

The headline figures will no doubt be impressive. But we shouldn’t “extrapolate them too much,” says Golub. Under the surface, there are data-quality issues. A wave of newly re-fired employees won’t be included in today’s Labor report. The stubbornly high ‘continuing claims’ figure will also go missing.

The Dow Jones looks set to bounce back on Thursday after yesterday’s disappointing close. Dow futures were up 225 points (0.88%) at 5.40am ET. Positive vaccine news from Pfizer and BioNTech also boosted investor sentiment. S&P 500 futures and Nasdaq Composite futures were up 0.68% and 0.55% respectively.

One data point that might give us more insight is today’s ‘initial claims’ count. This weekly number is expected to come in above 1 million again – a number six-times higher than before the crisis began. And, according to Mark Zandi at Moody Analytics, these aren’t just low-paid jobs. Companies in all sectors across America are announcing layoffs in a bid to save cash coming out of this recession. Employment figures out of the eurozone this morning also showed that jobless numbers are rising even as the countries exit lockdown.

Jonathan Golub at Credit Suisse says investors may be cheering the short-term bump while ignoring the long-term pain of getting people back to work. Golub is referring to the continuing claims count – a measure of how many people are repeatedly receiving unemployment checks. That figure is expected to remain stubbornly high, around 19 million. His words echo sentiment across an increasingly worried Wall Street that stocks no longer reflect the underlying economy.

And there are more headwinds on the horizon. The government’s Paycheck Protection Program (PPP), which is designed to keep people on the payroll, will soon end. That could see a wave of fresh layoffs as business decide to cut costs. The extra $600 weekly unemployment check will also vanish at the end of July, putting extra pressure on the newly out-of-work. So, yes, today’s ‘record’ employment numbers look fantastic. But don’t forget to zoom out and look at the big picture.

Dow Futures Soar But Don’t Be Fooled by a ‘Record’ Jobs Report, CCN, Jul 2

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