Category Archives: unemployment

26/4/21: What Low Corporate Insolvencies Figures Aren’t Telling Us


One of the key features of the Covid19 pandemic to-date has been a relatively low level of corporate insolvencies. In fact, if anything, we are witnessing virtually dissipation of the insolvencies proceedings in the advanced economies, and a simultaneous investment boom in the IPOs markets. 

The problem, of course, is that official statistics - in this case - lie. And they lie to the tune of at least 50 percent. Consider two charts:


The chart from the IMF is pretty scary. 18 percent of companies are expected to experience liquidity-related financial distress and 16 percent are expected to experience insolvency risk. The data covers Europe and Asia-Pacific. Which omits a wide range of economies, including those with more heavily leveraged corporate sectors, and cheaper insolvency procedures e.g. the U.S. The estimates also assume that companies that run into financial distress in 2020 will exit the markets in 2020-2021. In other words, the 16 percentage insolvency risk estimate is not covering firms that run into liquidity problems in 2021. Presumably, they will go to the wall in 2022. 

The second chart puts into perspective the IPO investment boom. Vast majority of IPOs in 2020-2021 have been SPACs (aka, vehicles for swapping ownership of prior investments, as opposed to generating new investments). The remainder of IPOs include DPOs (Direct Public Offerings, e.g. Coinbase) which (1) do not raise any new investment capital and (2) swap founders and insiders equity out and retail investors' equity in. 

The data above isn't giving me a lot of hope, to be honest of a genuine investment boom. 

We are living through the period of fully financialized economy: the U.S. government monetary and fiscal injections in 2020 totaled some $12.3 trillion. That is more than 1/2 of the entire annual GDP. Since then, we've added another $2.2 trillion. Much of these money went either directly (monetary policy) or indirectly (Robinhooders' effect) into the Wall Street and the Crypto Alley. In other words, little of it went to sustain real investment in productive capital. Fewer dollars went to sustain skills upgrading or new development. Less still went to support basic or fundamental research. 

In this environment, it is hard to see how global recovery can support higher productivity growth to bring us back to pre-pandemic growth path. What the recovery will support is and accelerated transfer of wealth:

  • From lower income households that saved - so far  - their stimulus cash, and are now eager to throw it at pandemic-deferred consumption; 
  • To Wall Street (via corporate earnings and inflation) and the State (via inflation-linked taxes).
In the short run, there will be headlines screaming 'recovery boom'. In the long run, there will be more structural unemployment, less jobs creation and greater financial polarization in the society. Low - to-date - corporate insolvencies figures and booming financial markets are masking all of this in the fog of the pandemic-induced confusion. 

Which States Did the Best or the Worst During the Coronavirus Pandemic?

For most Americans, the coronavirus pandemic has had two dimensions. The first dimension involves the excess deaths per capita recorded during the pandemic. The second dimension involves the direct economic impact from how people and governments responded to the pandemic, which for many, meant job losses.

The analysts of Hamilton Place Strategies came up with a way to visualize both dimensions for all 50 states in a single chart. Here it is!

Hamilton Place Strategies: State Outcomes from COVID-19

The chart indicates each state's COVID deaths per capita on the vertical scale, and each state's job loss per capita on the horizontal scale. By showing the national averages for both dimensions, it divides the 50 states into four quadrants.

The lower left hand quadrant is the best one in which to find your state. The states in this sector experienced both low rates of COVID deaths and low levels of job lossses during the pandemic. The best performing states are those that are furthest away from the intersection of the national averages for COVID deaths per capita and job loss per capita, where Idaho, Utah, and West Virginia having the best outcomes (Idaho and Utah with respect to job losses, West Virginia with respect to COVID deaths).

By contrast, the states in the upper right hand quadrant experienced the worst outcomes. Here, the combination of high COVID death tolls and high job losses indicates poor performance. Once again, the states furthest away from the intersection of the national average COVID death toll and job losses are the ones who ranked the worst.

Here, we find four states performing worst than almost all others. Louisiana, New Jersey, Nevada, and New York were the worst performing states in the U.S., with New York having by far the worst outcome of all states for both measures.

States falling in the other two quadrants had mixed outcomes, with high rates of COVID deaths per capita combined with lower than average job losses per capita, or vice versa.

With respect to COVID deaths per capita, Mississippi had the worst outcome in upper left quadrant. For the measure of job loss per capita, Hawaii had the worst performance in the lower right quadrant.

All in all, it's a neat bit of analysis. We wish we had thought to frame the data this way!

14/4/21: The share of those in unemployment > 27 weeks is rising


One way to look at the state of the real (as opposed to financialized and corporate-value focused) economy is to look at unemployment. And one of the strongest indicators of longer term changes in the structure of the real economy is the fate of the longer term unemployed. Here is an interesting snapshot of data: the percentage of those unemployed for 27 week or longer in the total pool of the unemployed. The higher the number, the more structural is the unemployment problem. 

If the above is not clear enough, here is the same data expressed in the form of the range for each 12 months period (rolling) between maximum share of the longer term unemployed in the overall pool of unemployment and the minimum share:

All of the above suggests we are in deep trouble. And this trouble has been persistent since the Great Recession: we are witnessing a dramatic increase in the duration of unemployment spells. Part of this is due to the impact of Covid19 pandemic concentrated in specific sectors. Part of this is down to the generosity of unemployment benefits supplements and direct subsidies during the pandemic. Part of it is also down to the longer term changes in the U.S. labor markets and changes in households' composition and investment/consumption patterns.

Irrespective of the causes, the problem is obvious: the longer the person remains unemployed, the sharper is the depreciation of skills and their employability. If this (post-2008) experience is the 'new normal', America is developing a massive class of disillusioned and human capital poor workers. 

25/720: Updated: America’s Scariest Charts: Unemployment Claims

Updating my Scariest Charts for the latest data, through thee week of July 18, 2020:

First, a summary table and chart for changes in the Initial Unemployment Claims:

Next: Continued Unemployment Claims through the week of July 11, 2020:

Key takeaways this week:

Continued unemployment claims changes:

  • Latest count at 16,197,000, down from 17,304,000 a week ago - a decline driven by both, re-gained jobs and exits from unemployment benefits;
  • Latest week w/w decline is faster than in any of the prior weeks of the current recession;
  • Latest counts are 14,495,000 above the levels recorded in the first week of the current recession and are 14,548,000 above pre-recession trough;
  • At last week's rate of decline, we have 13 weeks of unemployment claims to work through before recovering to pre-recession levels; based on the last 4 weeks average - 19 weeks.
New unemployment claims changes:
  • Latest new unemployment claims filed figures are the lowest in the current recession cycle, but materially close to those recorded in the week of July 4, 2020;
  • Nonetheless, we are now in 18 weeks of continued new unemployment claims filings in excess of 1 million per week.
Longer term view:
  • Discontinuation of emergency $600/week unemployment support payment or curtailing of the benefit is likely to push both of the above series down in the short run in mid- to late-August, with a knock-on longer term effect of increasing longer term unemployment claims in September and onward. 

16/720: Updated: America’s Scariest Charts: Unemployment Claims

New data for the week prior on continued and new unemployment claims continues to support a view of a relatively slow and slowing-down recovery in the U.S. labour markets.

Continued unemployment claims:

Continued unemployment claims in the week of July 4 amounted to 17,338,000 down 422,000 on prior week. A week before, the rate of decline was 1,000,000, and in 4 weeks prior to the the week of July 4, 2020, average weekly rate of decline was 711,500. Current 4 weeks average rate of decline is 737,750 driven by two weeks of > 1 million declines. The good news is that we now have 8 consecutive weeks of drops in continued unemployment claims. The bad news is that we do not know how much of the decline from the COVID19 pandemic peak is down to benefits expirations, or due to benefits cancelations due to some income being earned, with restored income being below pre-COVID19 levels. In other words, we have no clue as to whether jobs being restored are of comparable quality to jobs lost.

Next, Initial Unemployment Claims: these remain troubling too. In the week of July 11, 2020, there were 1,503,892 new initial unemployment claims filed, the highest number in 5 weeks.

As the table above highlights, we now have more than 17 weeks of new unemployment claims filings in excess of 1 million. Note: new unemployment claims filings can reflect many factors, including:

  1. A person becoming newly unemployed;
  2. A person who was unemployed and temporarily left unemployment insurance coverage due to receipt of irregular earnings;
  3. A person who was unemployed, and run out of benefits coverage, taking a temporary job, but re-listing as an unemployed at that job expiration; 
  4. A person who was unemployed before but did not secure past unemployment benefits; and
  5. A person who was unemployed but was denied prior benefits due to various reasons.
Here is the history of the Initial Unemployment Claims, smoothed out to a 3mo moving sum:

An updated employment outlook for July 2020: