The domestic labor market breached the 1M mark to the downside last week for the first time in 21-weeks.
A notable milestone but also a nod to the surreality we now occupy that what amounted to the largest job loss ever pre-COVID (and not by a little) was worth celebrating.
In any case, that revelry proved fleeting as the this week did not offer a celebratory encore as Initial State Claims re-breached 1M to the upside.
- Initial Claims = +1.106M = +135K W/W
- PUA Claims = +543K = +53K W/W
- Continuing Claims = 14.84M = -636K W/W and down for a 3rd consecutive week (reminder: Continuing Claims are lagged by 1Wk so the rise in Initial Claims puts the improvement streak at risk)
- Total Claimants (lagged 2 weeks) = 28.06M = -198K W/W = better, again, on the margin…. but not really.
Some quick context around the availability and implementation of Enhanced U.I. Benefits:
- According to FEMA (recall, Trump’s executive order for extension of Enhanced Unemployment Benefits tapped Disaster relief funds) only seven states have been approved for receipt of funds.
- Enhanced benefits = $300/wk (-50% vs prior support) with the option for states to contribute another $100/wk. Since pretty much every state is facing a massive shortfall, elevated health/benefit costs and no clarity on Federal support funds, any state level contributions are expected to be minimal.
- If an individual’s benefit eligibility is less than $100, they likely will not qualify for the additional $300 enhanced benefit – due to the fact that the states are counting the $100 they pay in “normal” benefits as their 25% contribution required under provisions of enhanced benefit funding. In other words, the people who need it most (potentially up to 1M workers) won’t be eligible to receive the enhanced payout.
- Approved states will only receive three weeks of funding before transitioning to a week-by-week format in an active effort to match and distribute remaining funds equitably.
- The same implementation challenges associated with changed eligibility requirements that plagued antiquated state systems at the beginning of the outbreak and delayed processing and disbursement of (enhanced) benefits is expected to reoccur (in some measure, at least) alongside this new implementation change …
- … So, even the earliest states to apply for and receive approval for enhanced benefit funding (back on August 8th) likely won’t begin disbursing those funds until the back half of August.
The above is playing out against a larger labor-stimulus backdrop currently being shaped by the following:
- Enhanced U.I. benefits expired at the end of July with recipients receiving unadjusted benefits in recent weeks (national average benefit is ~$380/week, back down from the enhanced benefit of ~980/wk).
- Early evidence (Walmart earnings commentary, grocery sales, etc) suggest consumer spending has begun to moderate as stimulus and enhanced benefits have ended.
- Last week we noted that it was unclear the extent to which storm Isaias and any associated damage/power loss across the east coast may or may not have impacted the filing/processing of Claims. ….
- … its still unclear whether deferred claims or organic deterioration were primary factors in this weeks increase in Initial Claims.
- PPP funds have been exhausted and a majority of small businesses have indicated acute risk of failure/closure if spending doesn’t fully renormalize by ~year-end. Full eco renormalization is not a high probability outcome and, suffice to say, the longer demand remains depressed the higher the probability for fresh layoffs … in both direct, front-line sectors and adjacent industries.
- As we’ve highlighted – while the Trend drop in PUA Claims is encouraging, the larger movement across Initial State Claims (and the simple fact that we are now 5-months into this "temporary" shock) suggest that job loss is shifting away for direct/temporary virus related impact to permanent job loss in adjacent industries.
- The decrement in enhanced benefits and the rolling expiry of loan forbearance programs (where deferred loan payments have had the opportunity to be diverted toward other discretionary spending) remain discrete risks to ongoing, durable recovery in the consumption economy.
