Takeaway: Erasing job gains all the way back to 1998 .... in 35 days.

Below is a complimentary research note from our analyst Josh Steiner. If you are an institutional investor interested in accessing our research email sales@hedgeye.com

Continued Ruin: U.S. Jobless Claims - 04.03.2020 unemployment line cartoon

HEDGEYE FINANCIALS WEEKLY LABOR MARKET READING

Initial jobless claims (SA) recorded another 4.4 million this week, while continued Claims (SA) shot up to an all-time high of 16 million.

Given the unprecedented speed with which initial claims have manifested, our view is that the proper way to contextualize the magnitude remains to look at continued claims. Continued claims of 16 million are currently >2x the previous high-water mark of sub-7 million set during the financial crisis. What's more, the flow-through from initial claimants to continuing claimants continues to grow - this week registering 78%, up from 68% and 64% in the prior two weeks.

As such, we would expect to see three-quarters or more of this week's 4.4 million initial claims show up in next week's continuing claims number, pushing that figure to 19+ million, or nearly 3x the previous high seen during the financial crisis.

The narrative coming from companies early in this earnings season is that the bulk of these layoffs are concentrated among entry-level, lowly-compensated individuals working primarily in the restaurant and travel and hospitality sectors. The implication being that we, as investors, should be mentally underweighting their relevance since someone earning minimum wage isn't as important economically as someone earning the national median or above.

While this may largely have been true in the earlier part of the downturn, it seems increasingly clear that there is a first and second wave of unemployment. The first week could be generally characterized by the description above; however, the second wave is beginning to take a toll on higher-income earners. White-collar folks. Moreover, realize that outside of those who are outright losing their job and being reflected in these numbers, there are millions more seeing reduced hours/wages/salaries.

Examples of higher-earners being impacted include healthcare workers being furloughed or taking across the board cuts to their salaries, lawyers seeing greatly reduced billable hours, etc.

While the markets seem to be growing marginally more confident in a "V"-shaped recovery, we are finding ourselves increasingly on the lower-for-longer side of the debate. The idea that the economy will rapidly bounce back from this engineered shutdown seems less likely the longer the shutdown goes on. It's also worth noting that this week's "reduced" initial claims number of 4.4 million is still more than 6x larger than the previous highest-ever recorded initial claims week set back in the 1980s.

In other words, what exactly is the market cheering? 

Continued Ruin: U.S. Jobless Claims - cl1

Continued Ruin: U.S. Jobless Claims - Flow

Continued unemployment insurance claims, the total number of people claiming benefits in all programs for the week ending April 10th, 2020, were 15.98 million and 16.44 million on a seasonally-adjusted and non-adjusted basis, respectively.

Continued Ruin: U.S. Jobless Claims - Continued

Meanwhile, initial unemployment insurance claims, filed in the week ending April 23rd, 2020, to indicate loss of employment in the week ending April 17th, 2020, were 4.43 million and 4.27 million on a seasonally-adjusted and non-adjusted basis, respectively.

Continued Ruin: U.S. Jobless Claims - Initial

 If you are an institutional investor interested in accessing our research email sales@hedgeye.com