Although the latest jobless claims figures came in better than expected, there are so many caveats that one wonders whether it even makes sense to parse the data. The July 4 holiday added additional “noise” to the already “loud” numbers.
One point that some believe deserves more attention is the disparity between the total number of claimants (32,922,335 for the week ended June 20) and the 17.75 million people who are ‘officially’ unemployed based on the jobs report. I mentioned that again on Thursday morning.
Commenting on the official unemployment rate, ING’s James Knightley says the 11.1% figure (which, in these surreal times, counts as a huge “win”), “simply does not reflect the reality of the US labour market”.
For Knightley, the market should focus on “the total number of people claiming unemployment benefits”, i.e., the figure mentioned above. To wit, from ING:
For the real story on what is happening in the US jobs market look at the measure of total unemployment claims – a new all-time high at 32.9 million… A broader range of people qualify for benefits under the Pandemic Unemployment Assistance program which had 14.4mn claimants as of week June 20. This only serves to illustrate the ongoing extreme stress in the jobs market and suggests unemployment is closer to 20% than the 11.1% currently listed as the “official” rate.
Bloomberg tells us that total “likely reflects an overcount of reported PUA continued claims — in some cases reflecting the number of retroactive weeks claimed rather than individual people”.
Maybe so, but Knightley’s rationale for harping on the total claimants figure is pretty straightforward even if you’re not inclined to agree with it.
He notes that the “unprecedented nature” of the current crisis meant that the rules around who can claim benefits were relaxed, which he says “makes sense”. “If you are a bar worker and all the bars are shut, what is the point of searching for the impossible?”, he asks.
Good question. And, I would caution, some of the bars are being re-closed in hotspot states.
ING contends that given the situation, the “official” unemployment figure “is under-representing unemployment in the US today”, very possibly by a large margin, so the total claimants data “is providing the fairer picture”.
In this case, use of the adjective “fair” means appropriate in the circumstances, certainly not “beautiful”. The picture is anything but pretty.
The real problem comes in when you consider that the extra $600 in benefits provided under the existing virus relief package may not be extended. I realize I mention this at least once per week (and often many more times), but I’m hardly the only one.
The expiration of those extra unemployment benefits represents a potential fiscal cliff for the country, just when layoffs from newly re-closed restaurants and other businesses may begin to show up in the data.
In the same vein, The Washington Post on Thursday reported that Republicans are seeking to lower the income threshold for the next round of stimulus checks, possibly to $40,000.
That makes some measure of sense, although because Steve Mnuchin is relying on last year’s reported income, it’s possible that people who made more than $40,000 in 2019 are set to make less than that in 2020 due to the virus. They wouldn’t receive a check if the threshold is dropped.
“The White House and congressional Republicans are exploring whether to restrict the number of Americans receiving the next round of stimulus payments, as conservative lawmakers face internal pressure to limit the size of the next relief package”, the Post says, before noting that what really matters, though, is getting the unemployment benefits extended: “Leading congressional Democrats are primarily focused on pushing for an extension of the $600-per-week increase in unemployment benefits approved by Congress in March and set to expire at the end of this month”.
ING’s Knightley underscores the absolute necessity of not letting this drift off your macro radar screen.
Letting the program expire “will result in a huge drop in incomes for those millions of people at a time when the reinstatement of COVID-19 containment measures is limiting the opportunities for finding work”, he cautions.
That won’t impact the July jobs report, but it could start to show up in August’s numbers and especially in September. If Trump isn’t aware of that, he should be.