The jobs number! The monthly employment report from the Bureau of Labor Statistics is always guaranteed to be a market mover. Looking at the weekly figures, which are reported by the Department of Labor, is less of a pastime for traders in normal times, but obviously, the current Covid-19 era has clearly put us in times that are decidedly not "normal."
While the financial media breathlessly reported that this week's initial claims figure fell below 1,000,000 for the first time since the beginning of the pandemic (the week of March 21st, 2020, using the DOL figures as a guide) that does not tell the full story. The key takeaway from the DOL release is the novelty of the novel coronavirus and its economic impacts in this country. The DOL lists eight separate unemployment assistance programs in its "Persons Claiming UI (unemployment insurance) Benefits" table. Even as a devoted data nerd, I have to admit that I had never heard of several of these programs. That is largely because, prior to March, the programs underlying those numbers did not exist.
It is a brave, new world of statistical analysis when it comes to analyzing the U.S job market. To be sure, the previous key data point -- "Regular State" initial unemployment claims -- fell to 15.7 million last week from 16.7 million in the week prior. Fewer people are receiving government assistance, and that does jibe with the headline figure, the initial claims number that measured "only" 953,000 last week, or 831,856 on a gross, not-seasonally-adjusted basis. Did fewer than a million people file first-time unemployment claims last week? No. The "Regular State" figure only tells part of the story. We have federal unemployment insurance now, really a new construct even to those of us who have been crunching numbers for years. Including the Pandemic Unemployment Assistance figure of 488,622 initial claims filed last week, the "real" new unemployment claims number was 1.5 million on a seasonally-adjusted basis, or 1.3 million on a non-seasonally-adjusted basis.
The next time you hear a financial commentator -- I have already heard several so far -- opine that we are coming back to "normal" in the U.S jobs market, make sure you change the channel. The destruction of jobs from Covid-19 has been unprecedented, and the pain inflicted on consumers' wallets will stay for many years.
The reported "real" unemployment rate -- a figure derived from DOL numbers that is separate from the BLS calculation -- was a minuscule 1.2% this week last year, when initial claims were largely in the 210,000-225,000 range each week. This week that unemployment rate was 10.6% on a seasonally-adjusted basis, with higher-than-average rates felt in Nevada, Hawaii, Louisiana, Puerto Rico, New York and California.
This is the only time I will ever write this, please ignore the S&P 500. It has zero current value as an economic indicator. If you want to worship at the feet of Powell and Mnuchin and hold on to your "stay-at-home" stock plays," that's fine. Just remember that people are staying at home not by choice, but because their jobs have been destroyed. Mistaking temporary changes for permanent ones is a very expensive mistake when analyzing stocks, but it can be just as expensive in the other direction.