It seems there’s a rotation afoot … one more pernicious than the mythical, sasquatch’esque rotation to cyclical/value that your boss has a blurry memory of perhaps seeing once out in the wild before prices where shackled by structural factors and domesticated by serial interventionism.
With Initial Claims rising, Continuing Claims rising, Total Claimants increasing for a 2nd week and higher-frequency labor indicators stalling/deteriorating on the margin in recent weeks, evidence of a rotation from direct & ‘temporary’ pandemic related job loss to permanent/structural job loss alongside protracted demand suppression and the expiry in jobless benefits and payroll support measures is beginning to cumulate.
Recall, some measure of scarring/hysteresis was always inevitable – the scale and scope of which was directly tethered to the duration of impact as the capacity for first order effects to network out and propagate 2nd round layoffs and emergent job loss in adjacent industries while metastasizing up the white collar/income hierarchy remained, primarily, a function of time.
With the labor shock in its 25th week and now spanning its 7th month, the clock tick of urgency has morphed to maddening beat for businesses operating on the edge and beholden to the Tell-tale Heart of ticking, real-time solvency risk associated with the pace of eco re-normalization.
- The data: Initial State Claims were flat at +884K against upwardly revised prior week figures. With PUA claims rising +91k to 839K, total Initial Claims were up W/W.
- The Seasonals: We detailed the DOL’s methodology change last week HERE that drove an illusory step function decline in the reported SA totals. Perhaps there is some additional noise in the SA data in the latest week given the holiday, but the NSA data showed another sequential increase suggesting any improvement on the separation side of the labor market remains stalled, at best.
- High Frequency Confirmation: The Jobs Hard to Get series in the Conference Board Consumer Confidence Survey rose in the latest August data, the number of small business open and the number of small business employee’s working has begun to backslide in recent weeks (Womply & Homebase data), small business employment/expected employment dropped for the first time since May in the latest Alignable Survey (Sept) and those in the ranks of permanent job loss and long-term unemployment continue to swell.
- Duration Consternation: As we’ve highlighted, duration of unemployment greater than 15 weeks continues to step function higher and the ranks of those unemployed for >26 weeks continues to build …. With the sum of the two now north of 8M and set to breach the GFC peak in the coming month(s). Obviously, it’s increasingly difficult to characterize that unemployed cohort as “temporary” and the flow through implications to the consumption economy increase as those numbers progressively matriculate past unemployment benefit eligibility timelines.
In short, the domestic labor market remains the poster child for the still yawning divergence between select fundamental conditions and asset market prices. Indeed, and fittingly, allocations to the “de-humanization’ theme continue to pay (literal) dividends as leverage to employment of carbon based labor continues to underperform in equity space.
