The unemployment numbers don’t tell the whole story.
The 2020 recession was one of the worst overall economic hits we’ve taken in the last decade. The unemployment rate in April 2020 topped out at a whopping 14.8% overall, trickling down to 10.2% in July, 6.9% in October, and ending the year at 6.7% for the month of December.
February of 2021 gave us another 0.5% drop down to 6.2%, leaving us just above (2% give or take) the subjectively-termed, “full-employment” level.
Although it seems as if we’ve made a pretty valiant recovery from a historic fall last spring, it’s worth noting that the pandemic’s onslaught eliminated many fringe jobs in a hurry, and some of those will never come back. 2020 saw retail workers often being hit the hardest, with many physical locations closing for the last time, never to open those positions again.
Unemployment income is taxable, whether that makes sense or not.
Many US recipients, some of them first-timers of unemployment benefits, are surprised to see they owe taxes this time around, instead of getting a refund. Unemployment is no W-2 salary, and the government isn't automatically withholding taxes from these checks.
Unemployment is taxed as regular income, whether that makes sense or not. Many commentators and politicians obviously see this, but that addition failed to make the cut in the $1.9 trillion dollar stimulus package, which... certainly made plenty of room for some other things.
Panic selling usually ends up costing you more than holding.
Those who sold their investment assets before or during the drastic marketwide selloff last March missed out on an equally drastic recovery and overall bull market for the rest of 2020.
The one-year return on the S&P 500 from March 4th last year is roughly 28% overall, despite the massive plummet it took last spring. If that didn’t cause short-sellers to shed a tear, the Russell 2000 will. The RUT is up about 51% since this time last March, despite last year’s panic and recent uncertainty.
Those are historic gains, and certainly shouldn’t be expected after every recession, but this exaggerated recovery emphasizes what we’ve already known about time in the market.
To state the obvious, we can’t forecast a recession like the weather.
From the perspective of mid-summer, it would’ve looked quite prophetic to have called for a V-shaped recovery last March. As time went on, it became clear that it’s not that simple, and the COVID-19 recession was not just a quick dip and rip. This recession is still ongoing for many Americans across the country, even if the popular statistics don’t always bear it out.
The thing is, it also hasn’t been a W-shaped recovery either. Even if some analysts are worried about a second crash pending as bond rates tick north and the markets trend tumultuously, the fact is that we’re all just “prepared for the worst, but still praying for the best” as world-renowned philosopher Lil Wayne so elegantly put it in 2011.
Attempts made at predicting the path of a recession are typically entertainment at most, and anecdotal lucky guesses at best.