Bad Jobless Claims Report
Last week’s jobless claims report was bad. This one was worse. The trend is unsettling. Don’t look at the declines in continued claims because there are people moving off traditional benefits to pandemic and extended benefits. Labor market has stopped improving in the past few weeks. We will likely see much less private sector jobs added in October.
Public sector probably won’t lose as many jobs in September, which could put lipstick on the pig that is the coming jobs report. Headline job creation probably won’t be enough to cause a stimulus to be passed because the election is 3 days before it.
At that point, policymakers will be following the election and ignoring the economy. If we don’t get a stimulus done soon, we will need to wait until December or maybe even into January after the president and new Congress are sworn in.
Specifically, initial claims in the last report were revised up 5,000 to 845,000. In this report, which was the week of October 10th, there were 898,000 initial claims which was above the consensus of 825,000. California’s data wasn’t updated even though they started accepting claims. There has been an influx of applicants as there was a big backlog. Therefore, California’s data won’t be included in the national numbers for 2-3 weeks until the backlog is gone.
Investors would like to see the numbers, but it makes sense they aren’t included because there was probably a major jump. Some algorithm-based traders may have reacted wrongly to that. By keeping California’s data the same, they are keeping the total artificially high because California probably saw a decline.
Now that the trend has reversed course, claims might be artificially suppressed. That’s pretty bad because claims are already rising. California is about 20% of the country’s claims. We need to wait a couple more weeks to see the state’s data.
Stimulus Very Much Needed
Non-seasonally adjusted initial claims were up from 809,000 to 886,000 which is the highest since the week ending August 1st. That means claims are the highest since the $600 in federal help ended. This is very bad news. It increases the need for stimulus. The stock market is going to start falling if no help comes soon. You should be worried about small cap value stocks in the near term if a stimulus doesn’t come. Good news is a falling stock market makes a stimulus more likely.
Some are starting to believe that the President will agree with Dems on a bill with more spending, but the GOP Senate won’t like it. Good news is if most Dems and some GOP members vote for it, it can pass. We might see more Dems than Republicans support it. Mnuchin stated, “What we have been focused on is the language around testing. When I speak to Pelosi today, I’m going to tell her that we’re not going to let the testing issue stand in the way. We’ll fundamentally agree with their testing language subject to some minor issues. This issue is being overblown.”
He’s right becauseabout $400 billionis a small difference. They could both give in by $200 billion to get something done. Obviously, the details on where the money is going differs somewhat, but there aren’t massive differences.
Continued Claims Are A Misnomer
PUA initial claims fell 91,000 to 373,000. California stopped reporting PUAs obviously and Arizona isn’t reporting PUAs. Both states have had crazy high totals. The high totals were wrong. Just because the data is getting more accurate doesn’t mean the labor market is improving. It’s probably not improving because the normal results are getting worse.
Continued claims are a misnomer because millions of people are running out of their normal 26 weeks of benefits because the recession started in March which is 7 months ago. We will see a sharp decline in continued claims throughout October and into early November.
Specifically, there were 10.018 million continued claims which was down from 11.183 million. As you can see from the chart below, in the past 4 reports if you add in extended benefits and pandemic benefits, continued claims have hardly fallen.
Furthermore, Georgia, Kentucky, Florida, and Hawaii aren’t reporting any PEUCs which means pandemic continued claims are even higher than the report indicates. Even without those states, there was an 818,000 increase in PEUCs. The labor market is in deep trouble. If the pandemic benefits expire in December, it will be a complete disaster.
There is nothing worse than uncertainty on COVID-19 combined with many people being forced into desperation mode. Even optimists are saying that this virus situation won’t be fully resolved by December. Some are looking for it to be gone by Q2 2021. 6 months is a long time to go without income.
Flying Is Increasing
It’s interesting that at a time where the pandemic is getting worse, we are seeing an uptick in flying. As you can see from the chart below, the 7 day average of TSA throughput is at 859,548 which put it above its Labor Day high. It’s still down from 2 million in early March, but this is a big step in the right direction.
Analysts are not that optimistic on this data point in the next few weeks though because the number of cases has been increasing. We might see a reversal over the next 6-8 weeks until the 3rd wave dies down.
Wisconsin Is In Trouble
All eyes are on Wisconsin as it is the face of the 3rd wave of COVID-19 cases. The state is experiencing an out of control outbreak that is causing its jobless claims to rise as you can see in the chart below.
On Thursday, the state had 3,747 new cases which was the 3rd most in the country. That’s high for the 20th largest state. There were only 17 deaths though. Less people are dying from COVID-19 than in the prior 2 waves.
Recent Comments