• Investing Insights & Exclusive Offers → Get Our FREE “Market Brief”
    Sign-up for our free weekly newsletter. Get unparalleled investing insights and exclusive Summer Sale discounts on Hedgeye research.

    Disclaimer: By joining our email marketing list you agree to receive marketing emails from Hedgeye. You may unsubscribe at any time by clicking the unsubscribe link in one of the emails. Use of Hedgeye and any other products available through hedgeye.com are subject to our Terms Of Service and Privacy Policy

Takeaway: Initial state claims of 1.5M + PUA claims of 761K combined for total claims of 2.3M - this equates to joblessness of >20%.

Below is a complimentary research note from our Financials analyst Josh Steiner. We are pleased to announce that we recently launched Financials Sector Pro, Josh's new research product. Click HERE to learn more. 

Weekly Unemployment Claims Are Ugly And Slow To Improve - 05.08.2020 jobs tree stump cartoon  1  


Observing the table below, in addition to the 1.5 million regular state unemployment insurance claims, there were an additional 761K million Pandemic Unemployment Assistance (PUA) claims filed. 

Recall, PUAs are part of the CARES Act and cover workers ineligible for traditional state UI assistance, including independent contractors, self-employed individuals, and others as detailed in the CARES Act.

In other words, the real, total initial claims filed last week is actually 1,508,000 + 760,526 = 2,268,526, which is flat from the week prior week. 

Jobless claims are likely tracking in the vicinity of ~34 million now. As of June 13, there were 29.2 million people collecting insurance (State: 18.5 million + PUA: 9.3 million + Other: 1.4 million). In the last two weeks (06/06 and 06/13), a further 1.5 million PUA + 3.1 million State have filed.

Thus, 29.2 million + 1.5 million + 3.1 million = 33.8 million, which on a labor force base of 153 million (33.8/153), yields an unemployment rate of 22%.

Now, to be fair, a portion of those collecting unemployment insurance are doing so because of reduced hours and not full unemployment. These workers are classified under "Workshare" programs and are reflected in the second row from the bottom of the following table.

Nevertheless, it's safe to say that the unemployment rate reflected in these figures likely exceeds 20%.

As we have said previously, either the economy is much worse than the market thinks or there is an unemployment insurance gravy train that everyone is jumping onto - or a little of both.

In rate-of-change terms, weekly initial state claims fell -3.7% w/w at their elevated level, while weekly initial PUA claims rose +10% w/w as the number of people claiming benefits across all programs decreased -1% w/w.

Weekly Unemployment Claims Are Ugly And Slow To Improve - Claims2

With no silver lining in rate-of-change, one is forced to observe the ugly absolute picture of historically elevated claims.

Given the unprecedented speed with which initial claims have manifested, our view remains that the best way to contextualize the magnitude of the labor market crisis is to look at continued claims.

Continued claims of 20.54 million are currently ~3.1x the previous high-water mark of ~6.6 million set during the financial crisis. 

Weekly Unemployment Claims Are Ugly And Slow To Improve - Claims