Week 34 into the Claims cataclysm and the separations stagnation remains firmly entrenched as Initial Claims hold north of 700K, Total Claimants holds above 21M and PEUC Claims push past 4M as individuals continue to exhaust normal state benefits (26 weeks).
And with the temperature downshift pending, COVID case counts and hospitalizations resurgent, burgeoning reimplementation of containment efforts, large-scale stimulus shelved and the labor/consumption economy staring down the income cliff associated with year-end expiry in pandemic related support/UI benefit programs, the near-term risk remains skewed negative.
That risk remains concentrated in the Services economy but with high-frequency and alt-data suggesting eco moderation domestically, declining activity and fresh lockdowns in Europe alongside falling domestic export volumes, the goods economy is not invulnerable.
That’s the negative framing. That doesn’t make it not true or dilute the probability that it shapes the marginal near-term change, it just means it’s purposefully devoid of “alternative facts”.
The plodding macro renormalization remains in motion, the vaccine news is clearly medium-term positive and the underlying reality vis-à-vis the labor market is very likely better than the Claims data suggest.
MEXICAN STANDOFF: JOBLESS CLAIMS vs NFP vs JOLTS
As we detailed in contextualizing the October NFP Data, comparing the flow out of Continuing Claims with the flow into LT Unemployment implies that the vast majority of individuals rolling out of Continuing Claims and not transitioning to extended benefits under the PEUC program are, in fact, being reemployed and not simply losing benefits altogether. See BABY STEPS | Oct NFP for the full discussion.
The JOLTS release – which provides detail data on gross flows in the labor market – is similarly suggestive. We received the JOLTS update for September (it lags NFP by 1 month) on Monday.
The relationship between Jobless Claims and the Layoffs/Discharges series in the JOLTS data generally tracks closely. That relationship saw a massive dislocation in the peri-Pandemic period as Claims spiked well in excess of reported JOLTS Separations – a decoupling that has shown some recent reconvergence but remains at an historically anomalous spread. The relationship and divergence is illustrated in the charts below.
A significant portion of the divergence probably owes to the unprecedented spike in “Temporary Layoffs” (as classified by the BLS) and associated reporting problems (those on Temporary layoff and collecting UI benefits may or may not have officially been counted as a Layoff/discharge in the JOLTS tabulation) along with timing/collection/methodology differences between the two series, but some portion of it is not readily explainable.
DOES IT MATTER? ….. YES, BUT WITH AN “IT’S-ALL-RELATIVE” ASTERISKS.
In short, the Claims data suggests we’ve plateaued at some dystopian equilibrium where job loss remains above the most acute level of layoff pain observed at any point historically. Both the NFP data and JOLTS data suggest the headline Claims data are belied by a more encouraging underlying reality.
We know the Jobless Claims data are plagued with multiple/redundant counting and some measure of fraud. To the extent they are further corrupted or present an overly distorted negative reflection of internal labor market conditions beyond the ‘known knowns’ is unclear.
In the end, I’m not sure it matters all that much.
That the underlying reality isn’t as bad as the Claims data suggest (which I’d agree) is important context but, again, it’s all relative.
700K in Initial Claims and 21.2m in Total Claimant 8-months into a ‘temporary’ shock is “better” than 1 (or 2 or 6 or 30) million but is wholly unimaginable outside of the current context and is better in the same way that Jobless Claims modestly understating the magnitude of improvement in the wake of the most acute labor shock in modernity is worth celebrating.
Of course, and alternatively, this could all just be a simulation (The World As A Neural Network) – a theory made all the more compelling by the surreality that is 2020 and the prospect that myriad and seemingly disparate macro, socio-economic, political and geopolitical plot lines all improbably converge towards a unified resolution as the year closes.
