America’s Scariest Charts: 23 August 2020 Updates

by Constantin Gurdgiev, TrueEconomics.Blogspot.in

Employment and Continued Unemployment Claims

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 for the week.

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Employment

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.

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.

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.

Continued Unemployment Claims

Here is the chart for continued unemployment claims, as reported through the first week of August:

Continued unemployment claims are still falling.

• The weekly rate of declines is improving. Most current week on week decline is 636,000, an improvement on prior week/week decline of 610,000. $ weeks average weekly rate of decline is 326,750.
• Latest continued unemployment claims are at 14,844,000 which is down from the COVID19 peak of 24,912,000 set in the week of May 9, 2020.
• We have registered reductions in continued claims in 11 out of the 13 weeks since the peak claims.

Here is the chart comparing historical records of recovery in continued claims to the current crisis period:

Note: This chart is even scarier if plotted on a linear scale (above is log scale):

Comparing current continued claims to pre-recession period claims:

• Current levels of claims are 8,687,000 higher than pre-recession period high, 13,195,000 above the pre-recession trough and 13,142,000 above the claims registered in the last month before the onset of the recession.

The key takeaways from this are:

1. What matters from now on is not so much the level of the recession peak, but the rate or the speed of the recovery toward pre-recession ‘normal’. So far, the rate of recovery has been fast. If sustained, we might be able to avoid much of the damage that arises from long-term unemployment duration.
2. The rate of benefits expirations will also matter a lot. We are looking at eligibility for unemployment dropping with weeks ahead, and the supplemental payment to unemployment insurance also falling off. As the two effect bite, the impact on the overall economy from reduced unemployment support schemes can be pronounced, triggering renewed recessionary risk.

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