Category Archives: pandemic

23/8/20: America’s Scariest Charts: Employment

 

Good news, folks, just in time for the Republican National Convention. The latest data, through July 2020, shows some recovery in non-farm payrolls numbers that is bound to make a feature in political chest-beating coming up next week.

Behold the chart:

In basic terms:

  • July non-farm payrolls stood at 139,582,000, up 1.291% on June, and up 9,279,000 on the COVID19 pandemic trough (April 2020). 
  • Average monthly rate of jobs recovery has been so far 3,093,000 through July. Which is worse than 3,749,500 average rate of recovery recorded through June. In other words, we are potentially seeing a slowdown in jobs recoveries.
  • At current average monthly rate of recovery, it will take us just over 4 months to regain jobs lost to COVID19 pandemic, assuming no further slowdown in the rate of recovery (a strong assumption).
  • Currently, non-farm payrolls sit 12,881,000 below their pre-COVID19 peak employment levels, attained in February 2020.
Some of these are good news. Assuming the recovery dynamics remain unchallenged by:
  1. Natural rate of moderation in jobs recoveries
  2. Renewed pressures of COVID19 (see the latest on this here:https://trueeconomics.blogspot.com/2020/08/23820-covid19-update-us-vs-eu27.html), or a second wave of the pandemic
  3. The ravages of political uncertainty surrounding November 3 elections (not only Presidential).
One side note: the above comparatives are current-to-past. These, of course, do not take into the account where the U.S. employment figures would have been, absent COVID19 pandemic crisis. Whilst estimating potential employment levels is a hazardous exercise, taking a simple exponential trend (decaying over time) from August 2018 through the latest reported period implies potential July employment level ex-COVID19 of 153,267,800. Which is not that much of a gap to the pre-crisis peak. 

Another side note: if we assume that the rate of decay in jobs additions that prevailed between June and July 2020 (-17% decay) continues into the future (also a strong assumption), jobs recovery to the pre-crisis peak will take us through May 2021. For the pre-pandemic trend case, the recovery will take us into March 2022.

More data analysis of the U.S. labor markets is coming up in subsequent posts, stat tuned. 

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:


10/7/20: America’s Scariest Charts Updated


Updating my series of 'America's Scariest Charts' for the latest data releases this week.

First: continued unemployment claims for data through the week of June 27th.


Continued unemployment claims fell from 18,760,000 in the week of June 20 to 18,062,000 in the week of June 27. Continued claims are now down 6,850,000 from their pandemic-period peak, which implies a decline of 978,571 per week since the peak. Based on the last two weeks' average weekly decline, it will take around 28 weeks to return continued unemployment claims to the pre-COVID19 levels.

Now, putting current crisis into historical perspective, the following chart uses log scale to show COVID19 recession experience in relation to all past recessions:


Next, new unemployment claims for the week of July 4, 2020. New claims in that week stood at 1,399,699, down slightly on the new claims in the eek prior at 1,431,343. Table below provides a summary:

Updated non-farm payrolls forecast for July 2020, based on June data for payrolls and the first data for July on changes in unemployment claims:



Average duration of unemployment is still completely swamped by the force and speed of the COVID19 onset, but is rising toward recession-consistent above-average territory:


3/7/20: Labor Market COVID19ed


I have been running a regular update on my 'America's Scariest Charts' covering labor markets developments (see most recent one here: https://trueeconomics.blogspot.com/2020/07/2720-americas-scariest-charts-updated.html). These charts rely heavily on two data sets: Non-Farm Payrolls data (monthly frequency), and initial unemployment claims (weekly frequency). I ignored for now two other data series:

  1. Average duration of unemployment: this is, of course, rising, but from low levels, as the COVID19 crisis is still relatively young; and
  2. Continued unemployment insurance claims: these data have been also proximate to the initial unemployment claims through the period of February-May.
Now, with two months of some jobs recovery, it is worth looking at (2) above. So here they are: continued unemployment claims charts:

Let us start with history:


There is no scaling in the above chart, just the numbers of people claiming unemployment insurance on continued basis. Which is telling: in recessions, these rise; in recoveries they fall. You can see that the lowest unemployment claims tend to happen some months before the onset of the subsequent recession. And recoveries take long. Of course, in the 1970s, there were fewer people in the labour force and, therefore, the absolute numbers of the unemployed were also lower.

Which means, it is worth rescaling each episode of rising and falling unemployment claims to the pre-recession levels ('norm') and to the recession peaks, taking into the account how long does it take unemployment claims accumulated during the recession to drop back to the levels of pre-recession claims.

So, methodology. I define 'normal' unemployment claims level as being the lowest level attained in the 12 weeks preceding each recession. This is set as an index of 100 for every recession. We look at the period of 6 weeks prior to the onset of the recession to identify the starting level of recession in terms of unemployment levels (these are weeks -6 through 1 on the X-axis). We then look at subsequent weeks (non-negative values on the X-axis) and plot index of unemployment claims (current unemployment claims normalized to the 'normal' level) through the recession and into the recovery, mapping these until one of the two events occurs:

  1. Either the index returns back to 100 - meaning unemployment claims finally are restored to the level of the pre-recession levels or the 'normal'; or
  2. In cases where this does not happen, until the onset of the next recession.

First, let us do this for all recessions since 1967 (when the data starts) through the end of 2019 - ignoring for now the COVID19 period.

Lots of interesting stuff in the above.

  • 2008-2009 Great Recession was long - longer than any other recession - in terms of labor markets recovery to 'normal' levels of unemployment claims. It was also sharp - second sharpest on record - in terms of the mass of unemployment claims at the peak of the recession. 
  • Legacy of the 1990-1991 recession was also painfully long, but shallower on the impact side (peak levels of unemployment claims). 
  • Epic 1973-1975 recession was horrific: it had a long lasting impact on unemployment claims and, in fact, it never got the point of returning unemployment claims levels back to the pre-recession 'normal'. 
  • We normally think of the 2001 recession as being 'technical' - caused just by the gyrations in the stock markets, aka the dot.com bubble burst. But in reality it too was pretty long in terms of its impact on the unemployed and it was pretty sharp as well.

And so on... but now, time to bring in the COVID19 pandemic. Let us start by just plotting it with the rest of the data. Boom!


The COVID19 pandemic made so many people claim unemployment insurance - on continued basis, not just one-off first time claims that anyone can file - that you can no longer meaningfully consider the rest of the recessions in comparison. In data analysis, we say that COVID19 pandemic is an influential outlier - it distorts our analysis of all other recessions. In this case, it is useful to use logarithmic scale to visualize the data. So here it is:

 
Even with log-transform, as above, the COVID19 crisis is off-the charts! No one has ever seen anything like this. Which we know.

The recovery from the pandemic has been sharp as well (steeper slope than in other recessions), but both charts above highlight the fact that whilst the U.S. economy is restoring some jobs during May-June re-opening period, the process of restoring these jobs is slow. Unlike what you hear from the White House and the Republican Party and its media, we are not in a 'tremendous recovery' and there is no 'roaring growth'. There is a mountain of pain that is being chipped away. At a current rate of 'chipping away', it can take the jobs markets some 10 months to come back to the pre-COVID19 'normal'. But that assumes that there will be no permanent or long-term jobs losses from the pandemic and the aftermath of the pandemic. It also assumes that the second wave of COVID19 infections that the U.S. is currently experiencing is not going to lead to such losses of jobs, and will not result in return to April-May levels of restrictions, and will not trigger a third wave of pandemic in Autumn. All three 'ands' must hold to get to that 10 months recovery. 


Stay tuned, I will be updating this chart as we go.