Initial Unemployment Claims Unexpectedly Dive, What Does That Mean?

Mish

Initial unemployment fell to a seasonally adjusted 730,000 from a revised 841,000.

What Does That Mean?

The answer depends on future revisions and trends which we do not know yet. 

Two weeks ago initial jobless claims dipped to a reported 793,000 for the weekending February 6. 

Last week, the BLS revised February 6 to 848,000 claims with the February 13 at 861,000.

Today the BLS says February 13 is 841,000 with the week ending February 20 down to 730,000.

It's anyone's guess what the BLS will say a week from now about today's big dip. More on that below but first let's discuss continued claims.

Continued State Unemployment Claims

Continued State Unemployment Claims  2021-02-25 Report

We have seen slow progress in continued unemployment claims but much of this is masked by people expiring all of their state benefits and falling off the roles onto various federal programs.

The federal numbers are so skewed by fraud, reporting errors, and double counting distortions that I stopped posting them.

Continued claims lag initial claims by a week. We will have a better idea of today's initial claims improvement by watching revisions next week and improvements in continued claims.

Powell Says the True Unemployment Rate is Actually 10%

Fed Chair Jerome Powell says the True Unemployment Rate is Actually 10%.

That is far more believable than the BLS assertion that the unemployment rate is down to 6.3%.

However, Powell went off the deep end regarding one of the alleged cures. Please click on the above link for discussion.

Vaccinations

Whether or not today's report is a mirage, vaccinations will come into play. The quicker people get vaccinations the quicker lockdowns and restrictions will end. 

That in turn will impact both initial and continued claims. The worst is likely behind, but the recovery will still be slow in many industries, especially airlines, restaurants, and travel.

Many people are working from home and there will be less corporate business travel as well. 

US Way Ahead of the EU on Vaccinations

Compared to the rest of the G-7 group of countries, the US is doing very well in vaccinations. Compared to Israel, the rest of the world lags.

For discussion, please see Alaska and New Mexico Lead in Vaccinations, Utah is Dead Last.

New Normal

The phrase "new normal" is widely overused but it sure applies here. 

Many things will not return to where they were, especially the need for office space, mall traffic (on a secular decline anyway), and corporate travel.

Note that Powell Disses Inflation and Ignores Questions From Congress About Leverage

I suggest the Fed made a huge mistake, and if so, it's way too late to rectify.

Mish

Comments (18)
No. 1-7
Eddie_T
Eddie_T

I don’t disagree when you say that higher inflation doesn’t create more jobs.....but I would just say that by being “broadly accommodative”...i.e. keeping interest rates very low.... it keeps people who MUST live on borrowed money from suffering as much in the short run....and I expect he is also thinking about the helicopter money about to be created out of thin air by the Congress...which is bound to be inflationary.....but maybe also might be necessary to keep displaced workers from real ruin.

What he said makes more sense to me if I think about the Fed “tolerating” a higher rate of inflation rather than intentionally creating the inflation with the idea that rising prices are good somehow for people who are already struggling.

I see no reason mortgage money has to be quite this cheap....but from my perspective it’s an unexpected gift that I probably shouldn't look horse-in-the-mouth. I’m willing to use whatever means I can to further my own personal financial goals....and frankly neither the Fed nor the government has done me too many favors over the years.

Six000mileyear
Six000mileyear

Yields on 10 yr spiked precisely at 1:00 PM today. Even though some of the spike was erased, yields are right about where they were in the weeks leading up to the COVID shutdown. So much debt has been taken on below 1/2 today's yield that refinancing will not be an option. I think the bond vigilantes have finally woken up.

njbr
njbr

Steep dive?

Looks like noise to me over the past 4-5 months.

bluestone
bluestone

Stockman wrote a while back that its the sheer quantity of issuance thats going to choke the market. I read in another spot that its the market waking up to default risk.
Given the extreme low yields the value of treasuries will half before yields get up to even 3% so you can imagine there could be a panicky stampede.

" From October 1993 to November 1994 US 10-year yields climbed from 5.2% to just over 8.0% fueled by concerns about federal spending in what became informally known as the "Great Bond Massacre." With some guidance from Robert Rubin, the United States Secretary of the Treasury, the Clinton administration and Congress made an effort to reduce the deficit, and 10-year yields dropped to approximately 4% by November 1998. "

njbr
njbr

Mitch McConnell says if Trump is 2024 nominee, he would vote for him.

....BAIER: If [Donald Trump] was the party’s nominee [in 2024], would you support him?

MCCONNELL: The nominee of the party? Absolutely....

Eddie_T
Eddie_T

I knew reading Daylight Robbery would get me riled up. Not saying I’m going to take up arms...but if I did, you could blame Mish. lol.

I’m nearly done with he book. I think the Big Data chapter is very good...although he doesn’t quite spell out the consequences of the digital blockchain sovereign currencies. But that’s enough material for a book right there.

Have you noticed the shift in tone on that one by Powell, just this week? I believe it is Yellen....who along with Christine LaGarde, now completely gets it. The way it can all work to make a new happy ending for the Banksters and the government tax men.

Brookings has estimated that about 17% of income tax goes uncollected....I think the true number is higher, probably substantially higher. And it is of course the well-to-do who are cheating....not the poor.

Just like always, we will get into a war and it will be sold as patriotic and necessary....to go digital....and going digital will mean transparent blockchain transactions for almost every dollar we spend.

Negative rates, the end of cash, and almost complete and perfect collection of all taxes....this is in our future. I give it five years max.

I’m not sure politicians are able to comprehend blockchain, but they can understand the benefit....and once they do, its a slam dunk. Yellen gets it. Lagarde surely gets it.

Actually, reading Frisby’s book made me feel pretty smart. I’m an old soldier now in these wars...I’ve lost some battles, but I think I’ve won the war. I’ll leave you with a quote that I don’t think Frisby put in his book, but certainly would fit right in:

“The avoidance of taxes is the only intellectual pursuit that carries any reward.”

                                                -----------John Maynard Keynes

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