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Below is a chart and brief excerpt from today's Early Look written by Senior Macro analyst Darius Dale.

In our 6/23 Q3 Macro Themes presentation, we stated very plainly that Job Growth Will Lag The Recovery In Economic Activity Throughout Phase 2. That proved to be the case throughout MAY, JUN, and JUL, and these data suggest that dynamic continued in AUG. Why? Because we still believe the economy is transitioning from depression to recession, not “recovery”.

The undue technical influence upon the SHAPE of this crisis does not absolve the economy from the very real pitfalls of the business cycle – which we’ve identified as the sum of the Inventory Cycle, Capex Cycle, Labor Cycle, and the Profits Cycle. Moreover, each of those cycles – which are at best in the mid-to-late innings of their “white swan” corrective processes – are hostage to the Credit Cycle, which, per the latest Senior Loan Officer Survey and Commercial Bank Loans & Leases data, continues to rapidly deteriorate underneath the surface of manipulated LQD and JNK prices.

All told, a “second wave” of permanent job loss is a high-probability event on the other side of Friday’s likely Positive RoC AUG Jobs Report to the extent we don’t close the output gap in a hurry. 

CHART OF THE DAY: Permanent Unemployment Could Double Again From Here  - 138