If the market – insatiable in its lust for moaarr stimulus – was collectively left unsated and underwhelmed with the absence of a discrete and convicted commitment to incremental asset purchasing – this morning’s Claims data probably only piles on the unpalatability.
With Initial State Claims essentially flat w/w at +860K, Total Claimants rising for a 3rd straight week and Continuing Claims realizing a notable -916K decline, it was a somewhat mixed bag but basically par for the COVID course as it relates to the stubbornly trudging improvement in the domestic labor market.
And with ‘acute shock’ slowly ceding ground to ‘structural damage’, temporary jobless progressively transitioning to permanent unemployment and Powell’s perceived QE reticence coupled with ongoing fiscal recalcitrance, market and fundamental angst is beginning to leak through to asset price vol.
One thing worth highlighting is that Claims may become increasingly beholden to a kind of inimical vice grip dynamic whereby Claims begin a get squeezed lower alongside the progressive emergence of a double sided constraint.
That is, with more than 61 Mn in cumulative Initial Claims filed (yes, that number overstates the magnitude of actual job loss) on the “supply” side we are slowly and simply running out of large numbers of people to fire. On the back end, those eligible for U.I. benefits (which typically last 26 weeks) will decline as the huge bolus of individuals currently unemployed for 15-26 weeks push past eligibility expiration.
To invoke the timeless bathtub example:
If the inflow of newly unemployed slows while the outflow picks up as individuals exhaust their eligibility timeline, then the level of water in the bath (Initial Claims) will realize a mechanical drawdown.
Suffice to say, Initial Claims will invariable continue to march lower but the How of that descent will begin to become more meaningful. The decline may or may not be The Good Kind.
A couple other quick highlights:
- The impact of CA/West Coast wildfires on the capacity to file and/or report Jobless Claims potentially introduces an elevated level of noise to the latest data.
- As we highlighted last week, enhanced U.I. benefit support funds were a (very) finite $44B sourced from disaster relief funds from FEMA and meant as a kind of minimal support bridge until a larger federal stimulus was passed …. which was largely presumed to be a given at the time but whose prospects have obviously diminished alongside partisan retrenchment. A handful of states have already exhausted their respective funding with others in immediate tow. As was evident in yesterday’s Retail Sales data, the flow through implications to the consumption economy as stimulus and enhanced benefit support rolls off and as the longer-term unemployed progressively matriculate past benefit eligibility timelines will matter.
