The Maddening Trudge To A Suboptimal Normal

A week after dropping below 300,000, US jobless claims fell again to a new pandemic-era low.

The 6,000 decrease from the previous week’s upwardly-revised headline took initial claims to 290,000.

The four-week moving average dropped to 319,750 (figure below).

Consensus expected 297,000 on the headline initial claims print, so this was another beat.

Continuing claims for the week of October 9 were 2.48 million, also below estimates (2.55 million).

At the margins, it was further evidence that the labor market retains a semblance of momentum, despite well-documented frictions including an acute shortage of workers. The drop to fresh pandemic lows came on the heels of consecutive weekly increases which momentarily raised eyebrows (figure below).

Incremental progress aside, the latest JOLTS data, while “stale,” again underscored the acute nature of America’s labor shortage. Despite a drop in openings, the disparity between vacancies and hires remained near record levels at the end of August. The quits rate hit a new all-time high.

In all likelihood, the grind lower in claims will level off at some point and monthly payrolls will continue to show a maddeningly slow trudge back towards full employment.

There will be no definitive “answers” to pressing questions about whether and to what extent government assistance delayed a return to “normal.” Ambiguity will linger in perpetuity. Economists will write papers. Nobody will read them. Academics will draw conclusions. Nobody will care.

Meanwhile, partisan rancor continues to cloud the outlook for the broader economy. Months of Democratic infighting has now “succeeded” in stripping away key pillars of the White House’s fiscal plan, including a sweeping climate initiative and free community college.

Ironically considering the level of uncertainty, it’s pretty clear where things are headed.

The US economy will find its way back to something that looks like “normal” within a year or two. The poor will stay poor. And the rich will get richer.

Joe Biden tried to abide by that old adage about “never letting a good crisis go to waste.” But as it turns out, US politics is now so intractably fraught that even the most cynical political maxims no longer apply.

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3 thoughts on “The Maddening Trudge To A Suboptimal Normal

  1. On the politics, I kinda of feel like the progressives (my side, more or less) are to ‘blame’ on that one.

    Once appeal to party unity had fallen to get Manchin and Sinema to support the broad Biden agenda, there was basically nothing to do but accept whatever they were willing to pass… and wait to see if we could either find ways to pressure them/unseat and replace them with better people or accept we might lose their seats but pick others elsewhere.

    Alternatively – do what Noah Smith suggests. Subsume the whole government into the DoD. No US politician dare stand against defense spending so you can get everything done by claiming “but it’s for defense! how dare you disagree? are you anti-American, sir/madam?”

  2. Democrats- get what you can and make a deal. After that, hope that Biden and crew will be competent enough on covid to retain one or both houses of congress, although historical precedent for whatever that is worth these days suggests that is a long shot. Also many Democratic longtime house guys are retiring – that is a tell. But play the long game. If things go ok, even if you lose one or both houses of Congress, you can get them back in 2024 if things go ok. If you get some sort of deal and possibly beat back voter suppression, you will have gotten a decent result. Take your gains, pray for a decent result in 2022 and see what happens after that. These days 3 months is an eternity in economics and politics.

  3. I think the Democrats might be better off with a less venomous 1.75 Trillion or so on a quick relatively non contentious deal because if they Ram through a 2-2.5 T deal it could very well alienate middle of the road voters who would vote for a Trump-less Republican party in 22 or 2024. Like RIA says take what you can get and move on..

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