Did the economy explode?

Last week, following news that the dropped to under 15 percent instead of the expected 20 percent, Donald Trump described the economy’s recovery to be better than a rocket ship, that it was like a rocket ship.

The problem was that the 14.7 percent number wasn’t really accurate. As Forbes pointed out, “the main reason why the 14.7 percent figure is underestimating the true rate of unemployment is a quirk in the BLS methodology

“Interviewers were told to classify people who were employed [but] absent from work due to COVID-related reasons as temporarily unemployed. Many did this incorrectly —correcting for this error raises the unemployment rate to nearly 20%.”

So, while Trump and the market were celebrating what appeared to be fantastic news, a large drop in the unemployment data, in reality the economy was struggling to recover.  Some people wondered if the administration was fudging the numbers, which was ironic considering Trump questioned for years the accuracy of the job numbers.

Over the past few weeks, as many states started to reopen, the stock market recovered, gaining back much of what was lost over in March. However, while some states, such as New York, were reporting declines in COVID-19 cases, other states, such as in the South, were reporting upticks in numbers, raising the prospect of an end to the reopenings.

All of this was probably a perfect storm which lead to the sudden drop in the market. For those paying attention it was an opportunity to recognize the market was out of kilter and give a chance to time the market.

 

 

 

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