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Week In Review


According to the Bureau of Labor Statistics (BLS), the U.S. economy shed 20.5 million jobs in April.  The unemployment rate was reported at 14.7%.  The labor force participation rate dropped from 62.7% to 60.2%.  Earlier in the week initial jobless claims were reported at 3.169 million, raising the total number of initial claims to over 33 million over the last seven weeks.

Our Take

The employment report was actually a little better than expected but with a major caveat.  The BLS issued guidance indicating that some laid off workers were incorrectly classified as not looking for employment.  Had these workers been correctly classified, the BLS estimates that the unemployment rate would be closer to 19.5%.  At this point, the actual rate matters far less than how quickly the unemployed can get back to work.  A return to pre-pandemic employment levels any time soon appears quite unlikely.


The German Constitutional Court ruled that the ECB’s previous QE program violated key EU treaties and thus should have been challenged by the German government.  The court did not rule that the previous program constituted monetary financing, which is prohibited by the German constitution, but that the ECB will need to demonstrate the proportionality of the QE program and address several other factors about the program.  The ECB will have 90 days to comply with the court’s ruling or the Bundesbank will be ordered to stop participating in the program.

Our Take

The ECB will almost definitely provide the German government with what it needs to demonstrate compliance with the court’s order, and the Bundesbank will be able to continue its participation in the QE program at issue.  However, this ruling sets a precedent that the German government and the Bundesbank will have to strictly follow the German constitution when participating in EU and ECB programs, and that programs that violate a tight reading of EU treaties will have to be carefully scrutinized by the German government.  The ongoing Pandemic Emergency Purchase Program will likely be challenged in a similar case.

U.S. Economic Data

March factory orders fell 10.3%, while orders for durable goods dropped 14.7%.  The April ISM non-manufacturing index fell from 52.5 to 41.8.  The business activity subcomponent of the ISM index plunged 22 points to an all-time low of 26.0.

Our Take

Bad data will continue to pile up over the next month as a clearer picture of economic fallout emerges.  Markets are likely to be a bit desensitized to the bad news, as it offers little predictive value as to how much and how quickly the economy can improve as shutdowns end.


Illinois delayed the sale of $1.2 billion of short-term general obligation debt.  The proceeds from the debt sale would have been used to offset the state’s revenue shortfall.  Illinois has indicated that the bond sale is now in a “day-to-day” status.

Our Take

The pricing of the bond sale would have been a good measure to determine how much the state’s borrowing costs would have increased.  However, it should not come as a surprise that Illinois postponed the new issue.  Uncertainty surrounding state finances continues.

All expressions of opinions are subject to change without notice in reaction to shifting market conditions.  All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness.  Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice.