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How the Unemployment Fiasco in Europe Is Kept out of Official Unemployment Rates

How the Unemployment Fiasco in Europe Is Kept out of Official Unemployment Rates

The massive and once-again extended Pandemic-era furlough programs serve their purpose, but…

In Europe, people who are furloughed are paid under government programs via their employers. Many of these programs have been created during the Pandemic. In theory, these people still have jobs. In practice, they’re not working, or are working heavily reduced hours. But they do not count as “unemployed” and are not reflected in the “unemployment” numbers. So throughout the Pandemic, the official unemployment rates barely ticked up, compared to the last crisis, and remain low for the EU era, despite tens of millions of people who’d stopped working due to the lockdowns (chart via Eurostat):

Under these furlough programs, the government pays companies, who in turn pay employees between 60% and 84% of their monthly wage. In some cases, the workers work fewer hours for less pay; in others, they don’t work at all. The workers take a hit to their income but their jobs remain intact, at least for the duration of the program.

The UK adopted a sweeping furlough program at the beginning of its last lockdown. Businesses can claim 80% of a staff member’s regular monthly salary, up to a maximum of £2,500. The money must be passed on to the employee and can also be topped up by the employer.

But the unemployment rate has begun to rise as people come off furlough, and those whose jobs disappeared entered official unemployment. The unemployment rate ticked up to 4.8% in the three months to September, from 4.5% in Q2 and from 3.9% a year earlier, according to the Office for National Statistics (ONS). In London, the unemployment rate surged by 1.2 percentage points from the previous quarter, to 6%, the largest quarterly increase in unemployment since the ONS started tracking the data in 1992.

…click on the above link to read the rest of the article…

Fed’s GDP and Unemployment Projections: Who Believes Them?

In addition to its blather about interest rates, the Fed also made numerous economic projections.
Economic Projections

Please consider the Economic Projections of FOMC Participants under their individual assumptions of appropriate monetary policy, September 2020.

Fed’s GDP, Unemployment, PCE Inflation Projections

Fed's GDP, Unemployment, PCE Inflation Projections 2020-09

GDP Projection

The Fed believes GDP will only contract 3.7% in 2020 then rebound 4% in 2021, and 3% in 2022.

Do you believe this?

Unemployment Projection

The Fed believes the Unemployment Rate will be 7.6% in 2020, 5.5% in 2021, and 4.6% in 2022.

Do you believe this?

PCE Inflation Projection

The Fed believes Core Personal Consumption Expenditure inflation (excluding food and energy) will be 1.5% in 2020, 1.7% in 2021, and 1.8% in 2022.

Do you believe this?

GDP Poll

Unemployment Poll

PCE Poll

My Take

  • GDP: I will take the under. Way under. Much of the rebound was due to $600 pandemic stimulus checks that expired on July 25. This will be a huge headwind going forward.
  • Unemployment: I am leery of games with the participation rate and labor force but I will go with higher.
  • PCE : This one is humorous. For months, the Fed has committed not only to 2% but letting inflation run hotter than expected for some time to make up for needed lost inflation. Yet the Fed admits it will not hit its targets until 2023. PCE inflation, as measured, is a joke. So perhaps the Fed is on target.

Massive Lines Form Outside Virginia Food Bank As Demand Hits One Million Meals Per Month

The economic recovery has stalled, and in some cases, reversed. The $600 unemployment benefits that Americans received following the virus pandemic that crashed the economy in March-April expired on July 31, which means a fiscal cliff has been underway for 44 days (as of Sept. 14).

Millions of people are still out of work, their emergency savings wiped out, and insurmountable debts are increasing. As former Federal Reserve Chair Janet Yellen warned in August, Congress’ inability to pass another round of stimulus checks could weigh on the economic recovery.

Readers may recall about a quarter of all personal income is derived from the government – so when a lapse in stimulus checks extends for well over one month – that could lead to new consumer stress.

In Richmond, Virginia, about 125 miles south of Washington, D.C., a food bank has been shelling out more than one million meals per month as the metro area battles deep economic scarring sustained by the virus-induced recession.

Kim Hill, the Chesterfield Food Bank CEO, told ABC 8News, “a lot of Chesterfield residents are showing up to get food would be an understatement — they’ve been averaging over a million meals a month.”

“You roll down that window, and you see the tears in that person’s eyes who never thought they would need the help of a food bank,” Hill said. “It breaks your heart.”

She said the volume of people her food bank is feeding is more than triple the levels versus last year. With increased demand, Hill said more volunteers are needed to handle the greater volumes.

“The life at the food bank here, we think it has changed forever,” Hill said. “Hunger should not exist in our country. We are one of the richest countries in the world, we need to be able to take care of our own people.”

…click on the above link to read the rest of the article…

If You Feel Like Something Really, Really Bad Is About To Happen, You Are Definitely Not Alone

If You Feel Like Something Really, Really Bad Is About To Happen, You Are Definitely Not Alone

If this is “the recovery”, what are things going to look like once economic conditions start to deteriorate again?  As you will see below, more than half of all households in some of our largest cities “are facing serious financial problems”, and Americans continue to file for unemployment benefits at a rate that the United States had never seen before prior to 2020.  When 695,000 workers filed for unemployment benefits during a single week in 1982, it established a record which stood for nearly 38 years.  But now we have been way above that old record for 25 weeks in a row.  On Thursday, we learned that another 884,000 Americans filed new claims for unemployment benefits last week…

Weekly jobless claims were worse than expected last week amid a plodding climb for the U.S. labor market from the damage inflicted by the coronavirus pandemic.

The Labor Department on Thursday reported 884,000 first-time filings for unemployment insurance, compared with 850,000 expected by economists surveyed by Dow Jones. The total was unchanged from the previous week.

Of course it is always important to look at the non-adjusted numbers, and according to those numbers we actually saw an increase over the previous week

The Labor Department changed its methodology in how it seasonally adjusts the numbers, so the past two weeks’ totals are not directly comparable to the reports from earlier in the pandemic. Claims not adjusted for seasonal factors totaled 857,148, an increase of 20,140 from the previous week.

This is the second week in a row that the non-seasonally adjusted initial claims have risen.

That definitely wasn’t supposed to happen.

We are supposedly in a “recovery” right now, and things are supposed to be getting better.

…click on the above link to read the rest of the article…

Market Update: The Fed’s Big Lie

Market Update: The Fed’s Big Lie

Ignore Powell’s happy talk. The Fed is desperate and merely playing for time.

Insanity is doing the same thing over and over again, but expecting different results.

Federal Reserve Chairman Jerome Powell announced on Thursday that the Fed will now shift its focus from hitting inflation targets and instead prioritize closing “unemployment shortfalls”.

This gives it the aircover to do “whatever it takes” until the unemployment rate is back down into the low single digits. Inflation can now run hotter than 2%, rates can stay at 0% (or go negative) for the next decade+, more QE…. all is fair game now in the pursuit of lower unemployment.

Essentially, the Fed is now tripling-down on the same failed policies that have created today’s zombie economy and the worst economic inequality in our nation’s history.

Rich 5% own 2/3 of the wealth

Perhaps the folks at the Fed are smarter than we think, and there’s actually a grand plan they’re pursuing that’s going to work out to society’s benefit?

Sadly no, reveals this week’s expert guest, Danielle DiMartino-Booth. Danielle knows the Fed inside and out, as she worked as a consultant for nearly a decade to Richard Fischer, President of the Federal Reserve Bank of Dallas, including helping deal with the Great Financial Crisis. She knows how the organization runs, as well as the specific people running it.

And her assessment is that the Fed is trapped in a nightmare of its own making and is merely playing for time at this point. Everything it throws at the situation is designed to hopefully get the system to limp through the next quarter or two without breaking, at which point they’ll scramble to come up with the next short-term “solution”.

…click on the above link to read the rest of the article…

Blain’s Morning Porridge – Aug 11 2020 – Who Pulled the Plug?

Blain’s Morning Porridge – Aug 11 2020 – Who Pulled the Plug?

“Unnervingly coherent and laughably mindless”

This morning’s opening quote isn’t an independent assessment of the Morning Porridge – but is lifted from a newspaper article on Artificial Intelligence.  It ends on a very scary tag: the AI is asked if it is conscious and responds: “To be clear, I am not a person.  I am not self-aware.  I am not conscious.  I can’t feel pain.  I don’t enjoy anything.  I am a cold, calculating machine designed to simulate human response and to predict the probability of certain outcomes.  The only reason I am responding is to defend my honour.”  This is not from some dystopian novel or a reboot of the Terminator series… but from the this morning’s FT

Should we pull the plug or ask it some more questions? 

Back in the real world…

We are now in the depths of the summer doldrums – and markets are showing even less correlation to global events than usual.  Stock and Bond Markets remain chronically distorted by the effects of Central Bank liquidity. China markets have shrugged off the new Trump US sanctions – and Xi has stepped up the arrest of protest figureheads in HK.  Ten-cent has taken a tumble on the back of Trump banning Tik Tok and WeChat – confirming the degree to which individual stocks are vulnerable to shifts in the narrative. Watch for case-by-case wobbles as the China-US rift opens wider – when will China decide to make trouble for Tesla to boost its copy-cars? 

But even the China/US tiff is likely to be something of a sideshow. My first question to the AI machine would be – just how deep is the coming global recession going to be?  Despite some recent strong economic releases, the trend shows the recession is underway.

…click on the above link to read the rest of the article…

Media Continues to Misreport Unemployment: 31.8 Million People on State & Federal Unemployment Insurance. Week 18 of U.S. Labor Market Collapse

Media Continues to Misreport Unemployment: 31.8 Million People on State & Federal Unemployment Insurance. Week 18 of U.S. Labor Market Collapse

I get tired of reporters or bots who don’t read beyond the 2nd paragraph of Labor Department press releases. 2.35 million initial state and federal unemployment claims. PUA claims (gig workers) now 41% of total unemployment. 20% of labor force on unemployment insurance.

It just doesn’t let up. An astounding number of newly laid-off workers keeps filing for unemployment benefits week after week and pile on top of the people already unemployed. And the number of people who started working again isn’t big enough to make a visible dent in the curve.

In the week ended July 18, the total number of people who continued to claim unemployment compensation  under all state and federal unemployment insurance programs, including gig workers and contract workers, edged down to 31.8 million (not seasonally adjusted), as reported by the Department of Labor this morning. It was the third highest level ever and just a tad off the peak:

Unabated lazy misreporting in the media.

If you read this morning or heard on the radio that 16.2 million people were claiming unemployment insurance – the “continued claims” – and you thought that there were only 16.2 million people who claimed unemployment benefits, you fell victim to lazy misreporting in the media, by reporters or bots that didn’t read the Labor Department’s press release beyond the second paragraph.

Those 16.2 million were only the claims under state programs, and do not include the claims under federal programs. All combined, there were 31.8 million people on the unemployment rolls. That’s what the Labor Department reported further down in the press release.

There is a huge difference between 16.2 million and 31.8 million unemployed people!

…click on the above link to read the rest of the article…

Never Before Have I Seen So Much Fake Unemployment & Jobs Data by the Bureau of Labor Statistics. Labor Department Nails It

Never Before Have I Seen So Much Fake Unemployment & Jobs Data by the Bureau of Labor Statistics. Labor Department Nails It

Labor Department today: People on state & federal unemployment insurance jumped to 31.5 million, worst ever.

Bureau of Labor Statistics today: 4.8 million jobs created, unemployment dropped by 3.2 million.

BLS under-reported unemployment by 13.7 million, based on data from the Labor Department. What’s happening is infuriating. Read and cringe.

Normally, the jobs report by the Bureau of Labor Statistics is released on the first Friday of the month. And the unemployment claims report is released Thursday every week. But this month, the monthly jobs report was also released today because of the 4th of July weekend. And now we have this delicious situation of both reports on the same day, with the Labor Department’s unemployment insurance data – people who are actually receiving unemployment benefits under state and federal programs – calling the Bureau of Labor Statistics’ survey-based report a liar. And we’ll go through them.

What the Labor Department reported today:

The total number of people who continued to receive unemployment compensation in the week ended June 27 under all state and federal unemployment insurance programs, including gig workers, surged by 937,810 people in the week, to 31.49 million (not seasonally adjusted), the highest and worst and most gut-wrenching ever:

The number of people receiving state unemployment insurance (blue columns in the chart above) has essentially been flat for three weeks (it ticked up this week), as many people got their jobs back while many other people were newly laid off. But the number of people on federal unemployment programs, including gig workers (red columns), has been soaring.

What the Bureau of Labor Statistics reported today:

…click on the above link to read the rest of the article…

A Summer of Protest, Unemployment & Presidential Politics – Welcome to 1932

A Summer of Protest, Unemployment & Presidential Politics – Welcome to 1932

In 1932, as in 2020, the nation experienced an explosion of civil unrest on the eve of a presidential election, writes James N. Gregory.

The Bonus Army stages a demonstration at the empty Capitol on July 2, 1932.
(Underwood and Underwood, photographers; Library of Congress)

An election looms. An unpopular president wrestles with historic unemployment rates. Demonstrations erupt in hundreds of locations. The president deploys Army units to suppress peaceful protests in the nation’s capital. And most of all he worries about an affable Democratic candidate who is running against him without saying much about a platform or plans.

Welcome to 1932.

I am a historian and director of the Mapping American Social Movements Project, which explores the history of social movements and their interaction with American electoral politics.

The parallels between the summer of 1932 and what is happening in the U.S. currently are striking. While the pandemic and much else is different, the political dynamics are similar enough that they are useful for anyone trying to understand where the U.S. is and where it is going.

Tanks and mounted troops advance to break up a Bonus Marchers’ camp of veterans protesting lost wages, Washington, D.C., July 28, 1932. (PhotoQuest/Getty Images)

Multiracial Street Protest Movement

In 1932, as in 2020, the nation experienced an explosion of civil unrest on the eve of a presidential election.

The Great Depression had deepened through three years by 1932. With 24% of the work force unemployed and the federal government refusing to provide funds to support the jobless and homeless as local governments ran out of money, men and women across the country joined demonstrations demanding relief.

Our mapping project has recorded 389 hunger marches, eviction fights and other protests in 138 cities during 1932.

Although less than the thousands of Black Lives Matter protests, there are similarities.

…click on the above link to read the rest of the article…

“V-Shaped” Recovery Not Now: It Gets Worse, 30.55 Million on Unemployment. Week 14 of U.S. Labor Market Collapse

“V-Shaped” Recovery Not Now: It Gets Worse, 30.55 Million on Unemployment. Week 14 of U.S. Labor Market Collapse

Had a setback. Over 11 million gig workers on unemployment insurance. But four states, including Florida, still can’t process federal PUA claims.

This unemployment crisis is shape-shifting, and some states are still trying to catch up with the torrent of unemployment claims, and some states still haven’t figured out how to process unemployment claims under federal programs, including Florida. And so, after three weeks of improving, the data tracking the unemployment crisis got worse.

The total number of people who continued to receive unemployment compensation in the week ended June 20 under all state and federal unemployment insurance programs combined, including gig workers, rose to 30.55 million people (not seasonally adjusted), according to Labor Department data this morning. This is up by 1.3 million people from the prior week (29.26 million), and the second-highest ever, just below the record during the week ended May 23. V-shaped recovery not now:

Even while workers in restaurants, bars, retail stores, hotels, hair salons, etc. are getting called back to work, it’s corporate jobs that are getting axed now. Layoffs at small companies happen quietly, and we rarely see them in the news. But layoffs at big companies make the news, such as Macy’s announcement today that it will lay off 3,900 staff in corporate and management areas, even as it’s bringing back store employees. This is one of the ways in which the unemployment crisis is shape-shifting.

Torrent of new state unemployment claims continues.

Not seasonally adjusted, 1.457 million initial claims under state programs were processed in the week ended June 20, up from 1.433 million initial claims a week ago. These are newly laid-off people who filed their initial unemployment claims that week. While a fraction of the 6-million range in late March, it is still more than twice the magnitude of the spikes during the prior unemployment crises in 1982 and 2009.

…click on the above link to read the rest of the article…

Fourth Turning Accelerating Towards Climax

FOURTH TURNING ACCELERATING TOWARDS CLIMAX

“At some point, America’s short-term Crisis psychology will catch up to the long-term post-Unraveling fundamentals. This might result in a Great Devaluation, a severe drop in the market price of most financial and real assets. This devaluation could be a short but horrific panic, a free-falling price in a market with no buyers. Or it could be a series of downward ratchets linked to political events that sequentially knock the supports out from under the residual popular trust in the system. As assets devalue, trust will further disintegrate, which will cause assets to devalue further, and so on. Every slide in asset prices, employment, and production will give every generation cause to grow more alarmed.” – Strauss & Howe – The Fourth Turning

Economists Predict Great Depression II for US Economy: Fast or V ...

I’ve been writing articles about the Fourth Turning for over a decade and nothing has happened since its tumultuous onset in 2008, with the global financial collapse, created by the Federal Reserve and their Wall Street co-conspirator owners, that has not followed along the path described by Strauss and Howe in their 1997 book – The Fourth Turning.

Like molten lava bursting forth from a long dormant (80 years) volcano, the core elements of this Fourth Turning continue to flow along channels of distress, long ago built by bad decisions, corrupt politicians and the greed of bankers. The molten ingredients of this Crisis have been the central drivers since 2008 and this second major eruption is flowing along the same route. The core elements are debt, civic decay, and global disorder, just as Strauss & Howe anticipated over two decades ago.

…click on the above link to read the rest of the article…

Rabobank: Stocks Go Up As Everything Is Going Down In Flames

Rabobank: Stocks Go Up As Everything Is Going Down In Flames

It’s All Going to the Dogs (and Goats)

Friday’s April US payrolls report showed 20.5 million jobs lost when in an ordinary downturn 200,000 might be considered bad; the drop in March alone was larger than that seen during the worst of the global financial crisis. In short, we face a global future of mass unemployment (now 14.7% in the US and 13% in Canada) on top of mass debt, both public and private.

Last week the German Constitutional Court (GCC) ruled that it is superior to the European Court of Justice (ECJ), and that the ECB has three months to prove it is not exceeding its remit with its extraordinary monetary policy. Yesterday the President of the EU Commission von der Leyen threatened to sue Germany, stating the final word on EU law is always spoken by the ECJ. Guess which court ultimately hears the case? The ECJ. How is this going to play out if the GCC doesn’t back down? Very badly in the Eurozone periphery, to the benefit of Euroskeptics. How is it going to play out in Germany if the GCC is forced to back down? Badly in Germany, to the benefit of Euroskeptics. Given the ECJ won’t back down and the ECB has said it will ignore the GCC, and the GCC is not likely to blink either, we seem set for an institutional crisis over the scope and shape of the Eurozone financial market – albeit one that rumbles on rather than erupting immediately.

US Vice-President Mike Pence, titular head of the US virus task force, is self-isolating after figures close to the White House were diagnosed as positive for Covid.

…click on the above link to read the rest of the article…

GDP Now Q2 Estimate At -34.90 Percent, So What Now?

GDP Now Q2 Estimate At -34.90 Percent, So What Now?

Summary

  • The Atlanta Fed’s GDP Now is estimating a -34.9 percent Q2 GDP print, which is 3.5x the largest quarterly decline in the post-WWII economy
  • If realized, the 11.3 percent non annualized first-half GDP collapse in 2020 will approach the worse year of the Great Depression, when in 1932, the economy shrank 13.1 percent for the entire year  
  • We are not paying much attention to these numbers as they reflect an economy that has been closed for two months, which should experience a relatively sharp snapback in Q3, with unemployment most likely peaking this month
  • Nonetheless, the pandemic and economic lockdown will do long-term structural damage to the economy
  • The rapid growth of the monetary aggregates alleviates much of the deflationary forces in the economy in the short-term and we perceive inflation a much bigger risk over the medium-term
  • If the GDP Now estimate holds, and even if GDP prints a record annualized 27.6 percent number in Q3, real output will still be 7 percent below the Q4 2019 level with unemployment remaining close to low double digits
  • We suspect the recovery will come too late and not be enough to save President Trump and the Republicans though the White House will tout it as “the greatest economic recovery in the history of the world“
  • Investors and companies should plan for higher capital gains and corporate taxes
  • Check out the astonishing performance of our stock picker’s large-cap portfolio, which is trouncing the S&P500 this year

Since the COVID crisis hit America, many businesses are operating at limited capacity while others have ceased operations completely.  The unprecedented aggregate supply and demand shock to the U.S. economy has resulted in horrific economic data, including the 20.5 in nonfarm payroll jobs lost in April and the unemployment rates shooting up over 14 percent.

…click on the above link to read the rest of the article…

U.S. Depression? The V-Shaped Recovery Fades Away

U.S. Depression? The V-Shaped Recovery Fades Away

The recent jobless claims figures show how difficult it will be for the U.S. recovery to be as quick and strong as initially expected.

  • 7.7 million jobs were lost in Hospitality and Leisure in April, 2.5 million in Education and Health, with 2 million in Retail and another 2 million in Professional Services. These sectors are unlikely to recover fast and enough to compensate the job losses of the past month and even less likely to see the same level of wages of 2019.
  • Credit card delinquencies are rising, and retail sales are going to see a very modest recovery because household debt is increasing, wages are under pressure and most citizens are changing their consumption patterns, looking to strengthen their savings in case another shock arrives.
  • Corporate debt is rising to new records due to the collapse in operating revenues. As such, companies will likely take all possible measures to conserve cash flow, reduce expenditure and be prudent about hiring decisions. This will lead to slower job creation and investment even once the economy opens.
  • Tax increases are likely to affect the recovery. The government deficit is soaring, with the Treasury looking at $2 trillion of new debt in 2020 due to the measures implemented to combat the economic impact of coronavirus. Unfortunately, the Democrats are looking to increase taxes just when the economy needs more investment and attraction of capital. If taxes rise significantly, what is already a weak outlook for capital expenditure and job creation is likely to worsen.

All of this makes a V-shaped recovery even more challenging than before. However, the U.S. economy is likely to recover faster than the Eurozone and suffer less in 2020.

…click on the above link to read the rest of the article…

As Unemployment Claims Rise, So Do Missed Mortgage Payments

As Unemployment Claims Rise, So Do Missed Mortgage Payments

Over 22 million people have filed for unemployment benefits in the past 4 weeks. Many struggle with payments.

Black Knight reports More than 2.9 Million in Forbearance, 5.5% of All Mortgages

Key Details 

  • As of April 16, more than 2.9 million homeowners – or 5.5% of all mortgages – have entered into COVID-19 mortgage forbearance plans
  • This population represents $651 billion in unpaid principal and includes 4.9% of all GSE-backed loans and 7.6% of FHA/VA loans
  • At today’s level, mortgage servicers would be bound to advance $2.3 billion of principal and interest payments per month to holders of government-backed mortgage securities on COVID-19-related forbearances
  • Another $1.1 billion per month in lost funds will be faced by those with portfolio-held or privately securitized mortgages

Forbearance Totals

Black Knight Forbearance Totals 2020-04-16

Payment Forbearance Under Cares Act

On March 27, 2020, President Donald Trump signed the Coronavirus Aid, Relief, and Economic Security Act (also known as the CARES Act) into law. A provision of the CARES Act allows borrowers with federally backed mortgages to request temporary loan forbearance for up to 180 days. Borrowers also have the right to apply for an extension of another 180 days of forbearance

Once a borrower requests hardship forbearance due to the COVID-19 pandemic, the act requires the servicer to offer a CARES Act forbearance. 

Pitfalls 

Forbes warns of Mortgage Forbearance Pitfalls

John Ulzheimer, an Atlanta-based credit expert formerly of FICO and Equifax, warns of a potential balloon payment.

“If the lender or servicer demands that you pay back the deferred amount all at once or in an otherwise expedited manner, that could be impossible for the borrower.” 

Unfortunately, having a mortgage servicer ask for a “balloon” payment once your forbearance period ends is a very real possibility. Borrowers from multiple national banks have reportedly been informed of the need to repay any delayed payments in a lump sum at a future date.

Three Things Not to Do

…click on the above link to read the rest of the article…

Olduvai IV: Courage
In progress...

Olduvai II: Exodus
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