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Employment’s Recovery Road Comes to an End Jobs didn’t get much worse in September, but they stopped getting better. This is a tale of where the recovery road for the US economy ended. Unemployment is the crux of the Covidcrisis economic story. While jobs showed a little improvement in September, a little digging through the numbers reveals the return to full employment has started a turn toward the worse. (Not as bad as “worst,” but “worse” than May-July.) The two warmest parts of the economy during the September calm that I wrote about in my last article (“A September to Remember“) were the job market and the housing market. I promised to cover those in detail in separate articles because they are more important than the other currents I brought up and more complex to where the headline numbers don’t quite lay out an accurate picture. In this article, I’ll uncover what lies below the surface of the employment numbers. Let us dig deeper into the slightly positive jobs reports of September At the start of September, MarketWatch gave the first hints that the jobs recovery was waning: ‘What’s concerning is that the pace of jobs growth is slowing down’ — economists react to August jobs report The August jobs report on Friday showed the coronavirus-battered U.S. economy recovered 1.4 million jobs last month, with the unemployment rate falling to 8.4% from 10.2%…. “Yes we’ve added large numbers the last few months, but still digging out of a very big hole.” — Martha Gimbel, economist at Schmidt Futures…. “What’s concerning is that the pace of jobs growth is slowing down. If we had nothing but months like Aug going forward, it’d take another 8 months to get back to Feb levels, and longer to get back to our pre-COVID trajectory.” — Ernie Tedeschi, economist at Evercore ISI….
And so it actually went in the month that played out. New jobless reports stacked up like this at the start of September: Zero Hedge New jobless claims continued to drop, but they were still NEW jobless claims, coming in at a rate four times faster than seen before the Covidcrisis. Moreover, the entire tiny amount by which new jobless claims dropped is more than accounted for by the fact that our most populous state, California, stopped processing initial unemployment claims until it can resolve its the claims fraud it has identified. Continuing claims also continued to drop but were still churning along at a much higher level than pre-COVID: As Zero Hedge reported in conjunction with these minimally improving graphs, however, these numbers were “completely useless” and even misleading for a second reason bigger than California in impact:
That would have looked like this, according to ZH, presenting an actual slight rise in joblessness (and this is without factoring in the California situation):
Add up all joblessness, and the grand total actually looked like this: From trundling downward to hiking sharply back uphill (and that is still without factoring in the California situation because you can’t because the number of legitimate new claims isn’t even known by California.) The fix is in So, while the headline numbers from August that arrived in September seemed to show some improvement, the real story is that falling unemployment did more than come to a dead end, it turned back uphill:
So, they fixed it.
Of course it is. It always is when the government’s old ways of jacking the numbers around are no longer working for them, so they have to calibrate in new methods to improve the results. And, just to make the improvement look better …
Why bother correcting the numbers from the earlier part of the Covidcrisis when it looks better for August/September to leave the old numbers looking worse because of how adjustments had been made so the newly adjusted numbers in September shine all the more. Besides, the grunts doing all the crunching are short-staffed due to the crisis anyway. But it gets worse Those were the government numbers, but as you can expect the truth gets worse when you look at non-government reports that didn’t get the same adjustment modifications. ADP’s September report on new jobs for the month of August came in well below what economists had expected:
So, to the charts of job losses above, we add the following chart of new jobs that opened up according to ADP: You can see the moves to the positive have nearly ended, and the total of all positives during reopening fell far short of making up for the nosedive we took during the COVID lockdown.
Eventually, when temporary job layoffs last long enough, they are rolled over into being considered permanent layoffs. As those rollovers into permanent status have kept tallying up, the total permanent job losses by the start of September looked like this: Recovery Road’s dead end The increase in permanent layoffs demonstrates what I’ve meant when I said during the summer that, by late summer, it would become obvious how much the economy had NOT recovered under reopening. The start of recovery, I said, would look like a “V.” For many, that would be enough to confirm their V-shaped recovery narrative. However, what mattered, which I urged you to look out for, was how far short the upside of that “V” ended compared to the downside. In other words, you only know the “permanent” damage when you have gone on long enough through the reopening to see where recovery stopped and what that leaves you with. The permanent job layoffs are the people who go from COVID unemployed due to temporary shutdowns to permanently unemployed because their employers never reopened for business due to bankruptcies or to infeasibility under reduced occupancy mandates and other kinds of permanent business closures. As a percentage of the total labor force, ZH reported the shortfall in the recovery looked like this: We sputtered out less than halfway back to normal — more of a square-root than a “V” so far. By October, The Hill summarized what we saw during the September reports this way:
While the president seems to have been deploying his “art of the deal” by walking away from a bad deal to get the other side to come down, it is not clear — yet — if that worked and will result in a deal of any kind. If not, the hurt under this huge overhang of permanent unemployment will be huge for the entire economy as unemployment benefits of various kinds and business relief programs start to expire.
In short, we’re not out of the woods. In fact, we’re barely beginning to see what the woods feels like as the evening shadows settle in around us with a long winter’s night still ahead.
Thus the month of waning summer in September, turned notably and predictably worse by the start of October:
So, the apparent terminus in our road back to full employment that we came to in August, played out as expected.
Where does all of this leave us?As you can see from this graph put out by Zero Hedge, it leaves us right back on track with a longterm decline in job growth that began long before the Covidcrisis at the start of 2019. Only thing is, the economy had extremely low unemployment back when the total job openings started that downtrend, and now we’re back to that downtrend in total jobs that are available at a time when the economy has near-record unemployment. Not what you need to climb out of a deep hole. That’s why we are now utterly dependent on government (fiscal) stimulus. Without those $1,200 stimulus checks, without the $600 augmentation of unemployment (now $300), and without the extension of unemployment eligibility beyond its normal limits, stock-market sentiment and especially consumer sentiment, as highlighted in my last article, will fall fast in light of the sustained massive unemployment problem laid out above. For now, people are remaining hopeful that stimulus will carry us over the COVID chasm. So, consumer sentiment has remained fairly good. However, Jim Rickards, former senior managing director for market intelligence at Omnis, Inc., believes that hope is under dire threat due to these problems.
Matching up with my own views about the dead Fed, Rickards goes on to say,
The Fed, as we have seen, is now reluctant to step in with any new programs or with ramping up its existing programs and has handed the baton off to the federal government. That is what Powell’s words were all about. That’s because the Federal government can put money (created by the Fed) directly into the hands of the people. Stimulating stocks isn’t going to help in the present economic crisis. High inflation will begin if people lose faith in the dollar or if too much money winds up chasing too few goods, as could become the case if government stimulus keeps putting more money into the hands of the unemployed than they had when employed. So long as the government only offsets the losses, it won’t matter unless we also have a shortage of goods. We could enter exactly that scenario as unemployment or COVID causes a shortage of manufactured goods or breakdowns in shipping or closures of retail or if trade wars diminish supplies from overseas. So, I’m not predicting high inflation will happen but saying be vigilant. Hyperinflation isn’t likely to happen with new stimulus money if it comes unless we also have a shortage of goods or if the stimulus money continues to exceed people’s losses. Then that money will bid prices up to get the goods that are in short supply. That is the ugly road by which you can wind up with very high unemployment and high inflation at the same time. The road to recovery has ended. That doesn’t mean we cannot keep recovering. It just means we’ll have to build more road as we go from this point on. The easy road has delivered all it is going to. Progress will be much slower and more problematic. It’s not even clear we have any leaders capable of mappings out a new road or of funding its construction, and meanwhile pitchforks and torches are running down the old road toward us.
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