In the initial days and weeks of the COVID (overreaction) shutdown, layoffs and furloughs were mostly a function of that very thing. A non-economic disruption. As time has gone on, however, continued joblessness can only be a function of economic factors meaning a huge problem (deflation) that isn’t being solved by time.
Because of this huge “surprise” in employment data, the assumption is being made how once the lockdowns are lifted everyone really will go right back to work and we all go on with our lives as if nothing much happened.
The reopening economy in May has, paradoxically, exposed the flaws in those overoptimistic hopes. People are going back to work but only from the one group. Up to now, proponents of the “V” have lasered their focus on only that one.
What we are seeing in unemployment claims, both initial and continued, is the dramatic damage done to the other group. Who are these involuntarily separated workers?
If you are unemployed currently, were you laid off because you couldn’t get to work (non-economic shutdown), or because (economic reasons) there’s now no work for you to go back to?
The latter category, those with no work to go back to. That’s what jobless claims are more purely indicating as these weeks fly by.
And not just signifying, but ongoing – now the second week in June! – at still an historic pace. Initial claims have improved, certainly, as have continued claims. But “improve” is absolutely a relative condition, a term of art being purposefully used to obfuscate this particular situation.
This is not meaningful improvement; instead, as I wrote about the payroll report, highly indicative of the underlying destruction, hidden as it may otherwise be, taking place all across an economy more damaged by the week.
For the week ended June 6, continued claims continued to be more than 20 million (this data is one week further behind initial claims). Peaking during the week of May 9, there was a substantial drop in mid-May as reopening took place in many places. Since that particular week, though, continued claims have flatlined with only modest declines in each of the last two.
Far more troubling, initial claims totaled just over 1.5 million for the week of June 13 (last week). Only a slight drop from the previous week, and while the trajectory looks good on the chart above you have to truly appreciate that gigantic number in the wider context.
After three months of this, a full quarter (13 weeks), initial claims continue to show up at unbelievable levels; so far above what has been experienced in prior contractions, even compared to the previous worst periods, such as 1981-82 as well as 2008-09’s Great “Recession.” It demonstrates ongoing levels of labor market undress for economic purposes that are so far out of line and character that it’s difficult to process.
If I erase the twelve weeks before this latest one, you can really see what I mean (above). In other words, 1.5 million in a week may be better than the 6 million plus late March and early April, but it’s not the same thing at all. Not really better.
During the worst 13 weeks of the Great “Recession”, January to April 2009, 8.4 million Americans, former workers, filed initial unemployment claims. In the last thirteen up to and including the latest one, more than five times as many have.
Five times as many as the worst since the Great Depression.
The latest week continues to be more than double the prior record. The numbers keep climbing by numbers never before seen with, to this point, no end in sight.
Why? Because Jay Powell flooded the world with liquidity, or because businesses, scared for what’s really happening, know that he didn’t? As anecdotes about credit supply being curtailed multiply, and business slow to return, slowed by economic reasons, jobless claims suggest survival mode not “V”-shaped recovery.
Deep and lasting scars of second and probably third order effects.
This is a disaster, one that is still unfolding despite, or because of, Jay Powell and his ilk, and all their disgusting efforts to hide these things and distract from the truth. Given what we are really talking about here, what’s truly at stake, I could not care less about stocks. This isn’t about stock prices.