• Investing replay

    HEDGEYE INVESTING SUMMIT

    SPECIAL HEDGEYE TV EVENT

    The sharpest minds in investing discuss the most important market and economic developments and their investing implications.
    Watch the free replay.

Takeaway: New entrants into the unemployment rolls continue to top three-quarters of a million weekly while those out 6 months are growing quickly.

Below is a complimentary research note from our Financials analyst Josh Steiner. Click here to read last months installment on Unemployment Claims. 

Sloth Speed | Initial Claims Holding North of 800K  - 05.08.2020 jobs tree stump cartoon  5

HEDGEYE FINANCIALS WEEKLY LABOR MARKET READING

Recall, the data from August 28th included a change in methodology. As such, the data from August 28th represented the first week reflecting the methodological adjustment, with prior weeks not being revised, new and old seasonally adjusted data will not be comparable.

Sloth Speed | Initial Claims Holding North of 800K  - Summary

Initial unemployment insurance claims (SA), filed in the week ending October 3rd were 840K, down -1% w/w. Cumulative initial claims have now hit ~64 million, although this includes a fair amount of duplicate filings and over-counting on both the state and PUA levels.

Sloth Speed | Initial Claims Holding North of 800K  - Initial

Pandemic Unemployment Assistance (PUA) claims filed in the week ending October 3rd were 464K, down -9% w/w. Although it's notable (and unexplained) that the Sep 26th PUA figure was mysteriously downwardly revised from 650,120 in last week's release to 508,707 in this week's release with no explanation given.

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.

Sloth Speed | Initial Claims Holding North of 800K  - PUA

For the last few months we've been advising that, given the unprecedented speed with which initial claims have manifested, the better way to contextualize the magnitude of the labor market crisis is to look at continued claims. Continued unemployment insurance claims (SA), the total number of people claiming benefits in state programs for the week ending September 26th, 2020, were 10.98 million, down -8% w/w. Continued claims of 10.98 million are currently ~1.66x the previous high-water mark of ~6.6 million set during the financial crisis. 

However, as many of those programs cover 26 weeks of benefits, and we're now in week 29 of the crisis, the new metric to focus on is PEUC - Pandemic Emergency Unemployment Compensation. We'll get to that in a minute.

Sloth Speed | Initial Claims Holding North of 800K  - Continuing

Sloth Speed | Initial Claims Holding North of 800K  - Allprograms 

Sloth Speed | Initial Claims Holding North of 800K  - Total unemployed II

Sloth Speed | Initial Claims Holding North of 800K  - Total unemployed

As flagged by Hedgeye Macro Analyst Christian Drake:

PEUC Claims (Pandemic Emergency Unemployment Claims) rose by +154K w/w and +328K in the last two weeks. Recall, PEUC Claims should be the metric to monitor as the flow out of regular state claims into the 13 weeks of extended benefits offered under PEUC will show up here … assuming individuals are aware of the benefits and that states can fully and smoothly transition people over, which remains a dubious assumption. 

Further recall that regular state benefits typically last 26 weeks and we are now thru week 29 of the Claims cataclysm. With the PEUC data lagging by two weeks, it reflects flow dynamics for week 27.

Sloth Speed | Initial Claims Holding North of 800K  - PEUC

In sum, we continue to see confirmation of our broader labor market narrative of temporary job losses giving rise to more permanent/structural job loss as suppressed consumer demand and expiring unemployment benefits and payroll support measures take effect.