For employment, as with GDP, it will be a long road back. With a sharp increase in GDP in the third quarter, we do expect employment to rise somewhat. We also anticipate some additional aid to state and local governments as well as less generous unemployment benefits, both of which could help boost employment a little. However, the pandemic has not gone away and for many businesses the same question remains: How to reopen in a way that protects the health of both employees and the customers while simultaneously making money in a recessionary economy? The answer in many cases will be a prolonged shutdown and we expect that the unemployment rate will still be in the teens entering 2021 and only dip into single digits entering 2022.
For investors, these should be sobering thoughts with the S&P 500 now just 10% below its all- time high. While U.S. equities still appear attractive, given 10-year Treasury yields of less than 1%, the risk of a correction has risen. The events of the last week have likely only increased that risk and this continues to warrant a cautious and diversified approach to investment strategy.
David Kelly is chief global strategist at JPMorgan Funds.