- 4.4 million more Americans filed for unemployment last week.
- Despite the news, stocks finished up on the week. And crypto is surging.
- Is it a sign that the crisis will be short-lived, or proof that Wall Street operates on a different plane of reality?
Unemployment in the US continues to soar, but that hasn’t stopped the markets from rallying. Stocks are up following unprecedented market actions by the Federal Reserve. And crypto today surged by a collective $10 billion in market cap, as the price of Bitcoin jumped nearly 10%. Why?
The US Department of Labor published its weekly report on unemployment claims today. Like weeks prior, Americans are flying for unemployment in the millions. For the week ending on April 18, 4.4 million more Americans filed for unemployment benefits. This is down from 5.2 million the week prior and 6.6 million for the first week of April.
Year over year, overall claims for unemployment benefits have leapt from 1.7 million to 12.5 million—a 635 percent increase.
Meanwhile, major indices in the stock market closed positive last week (the S&P 500, for instance, closed the week up 5 percent) and posted positive numbers behind oil’s impressive price resurrection. And, as has been the case since the March 12 market crash, Bitcoin and the rest of crypto have followed in near lockstep.
The stock market’s rally came after an infusion of cash across multiple sectors of both financial and economic markets from the Cares Act. This week, Congress is pushing through an additional relief package to provide more money to the Paycheck Protection Program (PPP) for small businesses after its initial $350 million in funding ran out in days.
This money adds to the trillions spent in aid to stanch an economic-turning-financial crisis that worsens with a world still under quarantine as a result of the coronavirus pandemic. Analysts at the Economic Policy Institute believe the money won’t be enough to avert the worst.
So why is the stock market climbing when things are looking bleak?
Commenting on the trend in an Los Angeles Times column, Pulitzer Prize-winning business journalist Michale Hiltzik chalks it up to expectations that the Fed will continue to “take care of things” as the gravity of the situation becomes clearer.
“[T]he unemployment filings removed all uncertainty that the economy is in for a rough few weeks or months. The market in the aggregate takes that as a positive because it’s likely to inspire ever more aggressive stimulus by Congress and the Federal Reserve, which already have pumped trillions into the economy.”
Hiltzik also believes that Wall Street is pricing in the COVID-19 lockdown as a short one, and they’ve diagnosed the economic downturn around it as a result of the pandemic. Once the disease is gone, then things should go back to normal, he argued.
Others, like Politico correspondents Ben White and Aubree Eliza Weaver, don’t have such a rosy view. To them, the market activity is proof that the market is completely decoupled from reality.
“Has Wall Street gone crazy?,” they write in a Politico Morning Monday newsletter. “The S&P just wrapped up its best week since 1974 (markets are closed today for Good Friday). We also learned this week that the Covid-19 virus has wiped out 17 million jobs in just three weeks, 10 percent of the entire America work force.”
And where is Bitcoin in all this? The Dow Jones finished flat and the S&P is down about a point and a half on the day. But Bitcoin is seeing highs it hasn’t touched in a month.
If the stock market is decoupled from America’s anemic economic climate, maybe Bitcoin is due for a decoupling, as well.