MARKETS IN REVIEW:
UPSIDE SURPRISE ON PAYROLL: The chart below was created early last week as a prediction for one measure of unemployment. The broad consensus was that the labor picture had continued to deteriorate significantly last month. When the May jobs report came out on Friday, it turns out payrolls increased by 2.5 million job and the U3 unemployment rate declined from 14.7% to 13.3%.
Job increases were particularly strong in sectors that are more sensitive to the country’s shutdown, such as leisure, hospitality, healthcare, and retail (see breakdown below). While cumulative job losses over this time have been close to 20 million, this is far less than the 30 million decline that many feared. The stock market rallied strongly on Friday in light of these positive surprises. Despite the rebound in jobs, the Great Coronavirus Recession (GCR) has still triggered the worst employment environment since World War ll and unemployment is still above the prior record level of 10.8% that was set in 1982. 
EQUITY MARKET – DISCONNECT OR DISCOUNTING?: With equity prices recovering amid persistently negative macroeconomic indicators, the disconnect has been puzzling. It is unclear whether the rebound indicates the market is looking forward (i.e. discounting a future recovery) or simply ignoring the historical depth of unemployment, plummeting economic activity and declining earnings trends.
The unevenness of the recovery serves to highlight the upper hand of structural winners — stocks of companies enabling and accelerating the digital adoption of goods and services across consumer, communications, health care and technology sectors. We believe that as long as equity volatility persists so will the advantage gained by these structural winners. While a vaccine for COVID-19 remains elusive, such dispersion in economic data, equity valuations, and performance will likely continue.
PERSONAL CONSUMPTION: In this lockdown environment, it is no surprise consumer spending has decreased. In fact, it declined by 12.2% in April—nearly twice the drop in March (see chart below). This pushed the year-over-year decline to -17.3%, the weakest pace in the history of this data series. Though this may soon improve given the recent rebound in employment numbers. 
Counter-intuitively, disposable personal income increased by 10.5% in April (chart below), the largest monthly increase ever recorded. Part of this is because many lower-paying industries are being disproportionately affected by job layoffs, thus increasing overall average wages. Additionally, the increased employment benefits that Congress has temporarily legislated, along with the stimulus checks that are in the process of being sent out, are having an enormous impact on the income statistics. Whether or not this decreased consumer spending paired with increased consumer saving continues will have a significant impact on the economic recovery.
TRAVEL WAY DOWN: Travel remains significantly low because of the pandemic shutdown and extensive work-from-home activity. The graph below shows various modes of travel. Barring the recovery in driving traffic (expressed by driving directions and including all those delivery trucks), virtually every mode remains very low from baseline activity. It will be interesting to see to what extent this rebounds as the country moves broadly into a “yellow” category.
EDITS TO PPP TO HELP SMALL BUSINESSES: We know many of our clients and friends run small businesses. To be a helpful resource, we pay close attention to changes in government programs. For example, the Senate passed changes to the popular Paycheck Protection Program (PPP) this week, allowing small businesses greater flexibility in using rescue loan funds. The bill, which passed the House last week on a 471-1 vote, now heads to the White House and if signed would become law.
The coronavirus program provides forgivable loans to help small businesses make their payrolls during the COVID-19 crisis. The bill would seek to extend the original eight-week period—when proceeds must be spent for loans to be forgiven—to 24 weeks or until the end of the year, whichever comes first.
Businesses would also have as long as five years (instead of two years) to repay any money owed on a loan, and they could use a greater percentage of proceeds on rent and other approved non-payroll expenses. About $130 billion remains from the second round of $320 billion that Congress approved for PPP. The initial round of $349 billion was tapped in just 13 days.
WHAT WE’RE LEARNING: The circumstances of the coronavirus pandemic have forced businesses to answer many unexpected questions. One of them is, “How do we return to our daily work at the office?” We have been discussing this as a team at Compass Ion Advisors. It has reminded us how many things make work-life balance possible. There are countless details we depend upon to sustain the simple, daily rhythm—traffic patterns, childcare, the sterility of a public door handle. But what detail of our lives has not been affected during this pandemic? As our team forms this practical plan, we find ourselves remembering the things we tend to forget and count our blessings.
This recent Forbes article gave a helpful overview of the rapid shift in businesses’ post-COVID workplace plans and preferences, particularly when it comes to remote work.