The payroll report for May was a shock because it came in as a plus when analysts, whomever they are, were expecting another huge minus. It seemed to set the tone for a realistic pathway being made out in the shape of the most perfect “V” ever written down. The mistake, such that there has been one, was interpreting the difference. While it was made to sound like a strong and resilient economy, instead it represented nothing more than reopened areas.

We are in the window of gigantic positives, if only because they show up in the shadow of even larger negatives and possibly more durable negative factors.

Since early June when the labor data sensationalized this process, both interpretation and analysts have been normalized to the expectation of positive numbers. The only positive result from it has been more realistic assessments of their character and nature (see: above).

The BEA today reports that National Incomes either dropped or rebounded, depending upon on how whatever data series handles the government’s payments to individuals. Nominal Personal Income, for example, which includes every category of cash receipt, including those which originate from Uncle Sam, declined somewhat given that the bulk of those safety net and helicopter disbursements were distributed in April.

Excluding transfer receipts, income generated from the economy rather than the government was up last month from what more and more looks like the bottom set the month before. Unfortunately, these income numbers actually do mimic if not corroborate the employment figures.

In other words, now that we’re over the “shock” of seeing positive numbers, better able to comprehend how that only means reopening, we can instead focus on the scale of the rebound and look at it more objectively by comparison to the hole we’ve fallen into. That’s to say to the bounce back really hasn’t bounced back by all that much (exactly what the last payroll report had really shown).

With that in mind, the significance of the government’s aid registers in the spending estimates (Real PCE). Expenditures (both real and nominal) rallied far more than income, likely a combination of the cash cushion provided in safety net and helicopter payments as well as making up some of the deferred spending foregone during the worst of it in April.

Until economic conditions actually bottom out, unlike the shutdown which already has, that will mean continuing to exhaust government payments in lieu of earned income which has disappeared and doesn’t come back so simply and easily (as denoted by jobless claims).

While the current federal administration continues to sound positive on the economy, there’s a reason (this is the reason) discussions have turned more serious about restarting the helicopter.

A second round of stimulus payments is on the negotiating table in Washington, but some of the 160 million Americans who got money the first time could be left out.

Instead, the Trump administration is pushing for a more limited approach. That’s more likely to garner Republican support in Congress, where lawmakers are expected to consider another economic spending bill in late July.

Economists have estimated (FWIW) that the first round more than offset the drop in earnings from layoffs and destroyed jobs (if only to that point), but that in many cases it didn’t have the necessarily intended effect. Lower income Americans spent more freely while higher income groups actually cut back (while simultaneously paying down a lot of debt). Can’t have that, not according to Keynes’ followers.

Therefore, Economists are recommending that only job losers should be made eligible to receive the next payment; because, no matter the positive spin, it’s hard to ignore now how job losses are going to be a huge problem moving forward. And while the first helicopter may have offset what income had been lost up to that time, it didn’t and couldn’t account for the far more impactful incomes that will continue to be lost over the months (years?) ahead.

To put a very fine point on it, huge positives or not, the double “L.” No “V.”

It actually didn’t take nearly as long as I had feared for mainstream recognition of how the labor market has been split into two largely separate groups. Those involuntarily separated workers (to use the unemployment insurance nomenclature) who have been prevented from going to work will, over time, maybe even quickly, go back to their jobs. In the second group, however, these are separated workers who have no jobs to go back to.

It is the size, scale, and reach of the latter group which will determine the shape of the rebound (not recovery; we’re still trillions behind the last time). Assuming the mainstream econometric models are relatively accurate (beyond a long shot), that would still mean the government paying off the jobless for years to come (see: 2009) if only in the vain hope of getting back close to even after a few more years.

And if everything doesn’t go perfectly as the models forecast, because you neither can nor should depend upon the Fed to get a single thing right, this current “L” could (perhaps likely) end up being even more substantial than the last one we’re still trying to live with. 

That’s the potential which is captured in the latest data – once you get past the fact that it was, in isolation, a gigantic positive.