Another 2.123 million Americans filed for unemployment benefits last week, a reality check of sorts at a time when market participants are understandably keen to look ahead to better days as states reopen and economic activity resumes across the country.
Some of the language below is recycled from last week’s jobless claims update. That’s deliberate. It’s a nod to the fact that when it comes to America’s unemployment crisis, the situation is still quite dire for the masses, who are too busy worrying about whether they’ll be rehired or if Congress will extend additional benefits come July, to worry about the S&P’s bounce off the March lows.
The latest jobless claims data is a reminder that the economic devastation from COVID-19 continues to exact a severe toll on the US labor market, nearly three months on from the onset of the crisis.
The previous week’s figure was revised higher to 2.446 million from 2.438 million.
The four-week average is now 2.61 million, down by about 435,000 (yellow line in the figure above).
I’ve said it every week for two months, but it always bears repeating: There’s really no “silver lining” in this. Yes, the trend is lower. And the late-March peak won’t be revisited. But that’s small comfort. Three months into the crisis, the numbers are still multiples of anything witnessed prior to the epidemic.
The 10-week total is now nearly 41 million.
Let that sink in. 41 million people have lost their jobs in the space of less than three months. For comparison, that is nearly the entire population of Spain.
There was one bright spot in the report, although I would stop short of calling it a “silver lining”.
Continuing claims fell for the first time during the pandemic, dropping to 21.052 million in the week ending May 16 from 24.9 million.
The question here is not whether “the worst is over”. Nor is the question about the “pace” of the rebound. Obviously, the question is how structural this proves to be. Will people be rehired? Will people kept on payrolls by the Paycheck Protection Program ultimately be let go?
For now, I’ll just leave you with one last chart.
Could be more useful to have a relative than absolute chart (population has grown significantly) but I understand you were trying to make a point comparing it with the Great Recession figures.
That is not relevant. A person who is fired today is not “less jobless” because there are more people. This isn’t about numbers. It’s about actual, real lives which have been shattered.
I would be very interested to see the average weekly earnings of the additional unemployed from this report versus the report from, say, one month ago.
I am guessing that the people laid off now are a pool of much higher earners than the people laid off from early in this cycle.
Therefore, even though the absolute unemployment number of people are beginning to trend down, the absolute amount of earnings is much higher.
Scary times.
In the face of such economic devastation how long will markets be allowed to run before a political backlash causes the gears to slip? The nascent class (rather than race) warfare that Bernie gently stoked may be growing unnoticed to suddenly spill out into the streets. This disconnect in outcomes just does not seem politically viable indefinitely.
I don’t think I have seen any indication of how this unemployment and Payroll protection mechanism is going to be unraveled as people slowly (or rapidly ) get back on the job ….Could be everybody gets paid double !!!! Oh well it’s not real money anyway LOL…
Another issue which I see highlighted less is a trend that has been underway for several years now. It is the changes in the energy markets. The ‘inefficiency’ in the frack oil business translates to employs too many people. Solar power low costs is because of employing very few people. Coal’s demise is because fewer people are employed. Even the economics of electric cars is due in no small part to less maintenance which means fewer people. These are almost all higher paying jobs.
The net result is an economy that is shifting to a smaller employment base, a shift we have seen through history repeat often. I wonder if this structural shift will require an economy with a different skill set and one that is producing something maybe even not yet invented. However to get over the divide it will require new skill sets. How to train for businesses that do not yet exist with skills that are not yet known is an interesting dilemma. However it seems we are spending less on education maybe at a time when we should be spending more.
I also wonder if our system of taxation is geared for newly producing systems. That is rather than focusing on tax breaks for the wealthy should we focus on tax breaks for new businesses, or colloquially tax breaks for the brave. However I fear such venture capital will be directed to less brave aspects such as remodeling old houses rather than new house production methods. How to keep the taxation policy pure would be a notable intellectual exercise that could positively affect the outcome.