TSP funds continue to rebound, and a decline in continued unemployment claims should help. However, there is a lot of economic transformation or “churn” occurring right now amid historical highs in joblessness. Image: Shutterstock.com

Initial jobless claims peaked at over 6 million per week for a couple weeks in a row at the start of the economic shutdown in late March and early April.

Since then, the rate of initial claims has slowed down, but still comes in at seven figures each week, or about 10x the pre-pandemic baseline of a couple hundred thousand per week.

However, those lost jobs accumulated into “continued claims”, which is a measure of ongoing unemployment. For the first time since the economic shutdown began, continued claims went down for a week. This chart shows both initial claims (blue bars, left axis), and continued claims (red bars, right axis):

Chart Source: St. Louis Fed

Official continued jobless claims peaked at about 25 million on May 9, although by broader measures within the deeper pages of the jobless report, they were as high as 31 million that week. In the most recent reporting period, which was from May 16, there’s a downtick to 21 million official jobless claims.

We’ll see in the coming weeks if this was an anomaly, or if the “top” in total job losses really is in. Initial jobless claims continue to be filed at an extremely elevated rate, but other existing job losses seem to be ending as people get their jobs back. So, we have a lot of economic transformation or “churn” occurring at the moment, with some industries continuing to shed jobs and other ones hiring back.

However, the economy has a long way to go to get back to a healthy state. Assuming that 25 million was indeed “the top” in continued jobless claims, if we get a 75% reduction from that number, that still leaves over 6 million continued jobless claims, which is roughly the number that they peaked at back in 2009:

Chart Source: St. Louis Fed

Meanwhile, the S&P 500, which is tracked by the C Fund and represents about 80% of the total U.S. stock market in terms of wealth, has increase to over 3,000 and has moved above its 200-day moving average. (Open TSP fund chart in new window.)

Chart Source: YCharts

Both the 3,000 level and the 200-day moving average are otherwise arbitrary, but they are psychologically important for human traders and noticed by trading algorithms as well, which means they can act as areas of resistance or support.

It’s a challenging market, because 2020 earnings are expected to be very poor, but investors are looking into the next year, and the Federal Reserve has been flooding the market with liquidity, which tends to be a very bullish force.

Meanwhile, 10-year Treasury yields are very low, at under 0.7%, even though the Federal Reserve has a long-term average inflation target of 2% per year.

So, many investors find asset allocation very difficult in this environment, with both stocks and bonds being historically expensive and with potentially poor return potential. Diversification is likely the best bet for many investors, and is offered in an easy package by the Lifecycle funds.

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Lyn Alden is a financial writer and an engineer, and holds a bachelor’s in engineering and a master’s in engineering management, with a focus on financial modeling and resource management. She specializes in analyzing and presenting financial data. Her investment work can be found on LynAlden.com.

TSP Investors Handbook, New 7th Edition