The number of new claims for unemployment for week ending 9/26/20 has been about the same over the last five weeks, in the mid- to high 800 thousands. Last big drop was the week of 8/29/20. To again put this in context, before the government induced shutdown of the economy new claims averaged about 220,000 per week.
Good news is the number of continuing claims for unemployment is continuing to drop, which means that more people are going back to work than loosing their job.
The devastating impact of the economic shutdown continues to be painfully obvious.
New Graphs
Starting this week that way the information is presented for this ongoing analysis will be in graphs.
View directly underneath Coronado Bridge shows the arches in the support towers. Photo by James Ulvog.
It is sad to personally observe the economic devastation from the shutdown.
We spent a few days in San Diego last week. Stayed at a hotel downtown near the harbor. Saw several things showing the severity of the economic damage.
Air travel
For quite a long time airplanes have not been allowed to leave San Diego International Airport until 6:30. It is funny to hear the first engine rev up a few seconds after 6:30 a.m.
I have noticed on previous vacations that there is a string of airplanes lined up ready to leave right at the stroke at 6:30. The planes take off approximately 1 minute apart.
We have been locked down long enough for the volume of statistics to build up to the point of allowing deeper analysis. As is always the case, the statistics can also be manipulated to give whatever answer you want. Deeper, honest analysis is starting to show surprising results, for example, the lack of correlation between infection rates and lockdown policies.
Surprising results on the low correlation will be mentioned after some game playing is described.
The annual motorcycle rally in Sturgis, South Dakota routinely draws huge numbers of people to the town, whose population is only 7,000 people. Attendance at the 10-day event this year was lower than usual with an estimated 460,000 motorcycle enthusiasts hanging around.
Frightening news reports at the time said this would cause massive numbers of Covid infections leading to massive numbers of deaths.
The comment that shutting down the economy represents a trade-off of lives versus jobs is an invalid comparison.
The real trade-off from a shutdown is lives versus lives.
People are dying because of the shutdown. The shutdown is killing people.
It is time to open the economy.
I don’t have time to summarize all the articles I have read making this point. Here are just three examples.
The pandemic is killing dementia patients
Washington Post – 9/16/20 –Pandemic isolation has killed thousands of Alzheimer’s patients while families watch from afar – The Washington Post, the Post, studied data from CDC to identify there have been 13,200 excess deaths from Alzheimer’s and dementia since the shutdown started. Excess deaths are the extra deaths over the number that would otherwise be expected because of some particular situation.
The number of new claims for unemployment for week ending 9/12/20 dropped a little, with “only” 860,000 people losing their jobs, down from an upwardly revised 893,000 the previous week. For contrast, before the government induced shutdown of the economy new claims averaged about 220,000 per week.
Better news in the data is the number of continuing claims for unemployment dropped about twice as much as the new claims, to 12.6M for the week ending 9/5/20. That is the lowest since the shutdown started.
As I continue to sort out for myself what this means, will continue listing the stats I’m tracking.
The number of new claims for unemployment and number drawing unemployment is provided by Department of Labor. I calculated the net change, which I assume represents the number of new jobs, although it could also be that people dropping out of the job market wash into the new jobs number:
For the third time since start of the recession, the number of new claims for unemployment for the week ending 9/5/20 was below the 1,000,000 mark. For contrast, before the government induced shutdown of the economy, new claims averaged about 220,000 per week.
On the other hand, the number of new claims was flat for the week – the damage from the shutdown in terms of new claims did not go down.
As I continue to sort out for myself what this means, will keep listing the stats I’m tracking.
The number of new claims for unemployment and number drawing unemployment is provided by Department of Labor. I calculated the net change, which I assume represents the number of new jobs, although could also be that people dropping out of the job market could wash into that number:
After shooting from 3.4% in February to 14.7% in April, the headline unemployment rate has dropped to 8.4% in August.
You will interpret the statistics as you wish.
Looks to me like people are slowing getting back to work after the shock of the pandemic and follow-on government-ordered shutdown of the economy.
There are six different measures of unemployment, each providing a slightly different perspective. Put them all together for a more complex picture the economy.
At the top is a graph since 2007 of U-3, the headline statistic, along with U-6, the broadest stat which includes discouraged workers, marginally attached, and those working part time because they can’t find full time work.
For a closer picture, focus in on the stats since January 2019:
What the California economy might look like by the time it is allowed to reopen. Photo of abandoned farm in North Dakota by James Ulvog.
This is the third in a series of posts describing the damage caused by shutting down the economy. First post discussed recent news on economic damage. Second post described ongoing health damage.
Some things are *not* going wrong
Just under half a million people attended the motorcycle rally in Sturgis, South Dakota from August 7 through 16.
Check out any of the pictures from the rally and you will notice a distinct lack of masks and social distancing.
Expectations in most media sources were for this event to produce massive amounts of infection.
Half a million people. In one town.
The tracking results are in from the massive numbers of people who were infected and the resulting fatalities from this massive event.
It is shocking. Amazing. Head-shaking. Astounding.
Best info available is that:
196 people tested positive for COVID with results linked to attending Sturgis.
4 people died.
To put that in context, 5 people died of motorcycle accidents in Sturgis during the rally.
Growing awareness something is wrong with lockdowns
8/24/20 – Wall Street Journal – New Thinking on COVID Lockdowns: They are Overly Blunt and Costly – Article has a massive amount of information on the course of the pandemic, wide range of strategies by national and state governments, and large volume of statistics. The story is told basically scrambled egg style with no pattern or trends or storylines that I can easily summarize.
Study by the British organization compared data from July 2019 to June 2020.
They found 19.2% of adults were experiencing depression in June 2020 compared to 9.7% in July 2019. That is a doubling as a result of the pandemic.
Severity of the rise can be seen by 6.2% of the population that had ongoing depression, 12.9% developed moderate to severe depression during the pandemic, and 3.5% some improvement during that time.
Is there any doubt that the overwhelming portion of that increase is due to the isolation and economic damage caused by the government ordered shutdowns?
An interesting exercise is to put that data into table as follows:
What the California economy might look like by the time it is allowed to reopen. Photo of abandoned farm in North Dakota by James Ulvog.
Over the last several weeks I have accumulated a number of articles describing the economic and health damage caused by the government ordered shutdown of the economy.
I’ve been wanting to post these for a while. In light of the California government imposing more severe constraints on when the economy will be allowed to start functioning again, it is now time to publish.
Economic damage
7/30/20 – Wall Street Journal – US Economy Contracted at Record Rate last Quarter; Jobless Claims Rise to 1.43 million – The preliminary estimate of the collapse in the US economy for the second quarter came in at an annualized 32.9% drop. Again, that is annualized. In addition, it will be revised in each of the next two months as additional data is gathered by the feds.
That follows an annualized drop of 5% in the first quarter.
Unemployed business people. Image courtesy of Adobe Stock.
For the first time since 4/4/20, the number of new claims for unemployment increased for the 8/15/20 reporting date. Oddly, the increase of 109K is small for the time of pandemic but would be equal to about 4 weeks of new claims before the pandemic hit.
As I continue to sort out what this means, I’ll continue giving the same stats as provided for recent weeks.
Since the middle of June, which is when I started tracking this metric, the number of new jobs has exceeded the newly lost jobs by 5 million.
Looks to me like these stats suggest the economy is recovery, but at a slow pace, with unprecedented numbers of people still out of work at the same time as an extremely high number of new claims for unemployment are still rolling in.
The number of people drawing unemployment the number of new claims, and the resulting number of new jobs:
(How to put that information together? Well, the reason I’m blogging is to put my thoughts into writing, which forces me to think deeper in order to sort out what is going on around me.)
The U-3 unemployment rate in last four months with change from previous month:
march
4.4
april
14.7
10.3
may
13.3
(1.4)
june
11.1
(2.2)
That is a 2.6% drop in two months after a 10.3% rise in April.
Wow.
Graph above shows key unemployment rates since the start of 2019.
This discussion will be posted at several of my blogs.
For longer term perspective, consider the rates since before the Great Recession:
New unemployment claims for week ending 6/27/20 were 1.427M, down slightly from 1.480M the previous week. That is five weeks of between 1.4M and 1.9M following ten weeks of between 2.1M and 6.9M new claims.
The impact of new claims is mitigated by the number of people getting rehired which leads to the calculation of ongoing payments for unemployment.
20.29M revised down from 20.5M- 6/13/20
19.23M revised down from 19.52M – 6/20/20
19.29M – 6/27/20 (a rare and exquisitely unexpected typo refers to this as the 6/20 week)
That shows the number of people finding new jobs is running higher than the number of people losing their jobs.
This discussion will be posted at several of my blogs.
Going concern thoughts for accountants: I have stopped cross posting all my comments on the pandemic to this blog. The focus here is accounting and attestation issues.
The following conversation is worth listing here, so you can bring into consideration what is going on in the broader economy as you ponder your client’s going concern assessments. The economic damage from the shutdown is an issue for audits, reviews, and comps.
You might pay particular attention to comments by the Atlanta Fed on near-term GDP forecasts.
The damage from the lockdown is spreading. More news is emerging about the devastation that took place in just the first full month of the closure.
The damage will continue to grow the longer the shutdown continues. At some point it will start compounding, growing at a faster rate out of proportion to the time that is passing. Keeping the economy closed now is unnecessarily so the compounding damage is a choice.
Merely a few of the articles in recent days:
Guess on GDP shrinkage in next quarter
Disproportionate number of poorer households hit by job losses
Collapse of tax revenue in New York state
Collapse of home sales in Southern California
Another retail chain announce store closures and another announces liquidation
It is imperative to reopen the economy in full, not just for ‘curb-side delivery.’ If we don’t open soon, I fear the following articles will be mild in comparison to what we will see in the future.
This discussion will be posted on several of my blogs.
5/16/20 – Fox Business – US GDP could sink over 40%: Atlanta Fed – Federal Reserve Bank of Atlanta is forecasting a 42.8% drop in GDP for the second quarter of 2020.
For a number of years I have been tracking the monthly unemployment data. That information is shown in the graph above. Included is monthly information back to April 2010. Prior to that I only picked up a few data points.
This graph shows the hit from the Great Recession and the painfully slow recovery which followed.
This discussion will be posted on several of my blogs.
Six different ways to measure unemployment
There are actually six different ways to calculated labor underutilization, all provided by the US Bureau of Labor Statistics. The economic devastation caused by the shutdown of the US economy means we need to start looking at these different indicators.
The above graph shows what is referred to as the U-3 and U-6 rates.
“What in the world are you talking about,” I hear you ask.
