New claims for unemployment are flat compared to three weeks ago. Ongoing claims for unemployment at the state and federal level are declining, slow though the decline may be.
Number of weekly new claims for unemployment was 406,000 three weeks ago and 412,000 the most recent week. The increase in the most recent week offset the decline in the previous two weeks.
Most recent data shows ongoing claims at the state level dropped from 3,602,000 three weeks ago to 3,518,000 in the most recent week, for a net decrease of 84,000. There was an increase two weeks ago, large drop last week, and essentially no change this week.
The number of new claims is still double the average from before the pandemic.
Purpose of these posts on economic statistics is to help all of us keep current on what is going on in the overall economy.
Revised number of weekly new claims in state programs over the last four months to show the trend:
728K – 3/27/221
590K – 4/24/21
406K – 5/22/21
412K – 6/12/21
Following graphs show the devastation from the economic shutdown.
New claims
New claims for unemployment by week since the start of 2020:
Changes in the Consumer Price Index have been making a splash in the news lately. Increases over the last three months have been unusually high.
The headline consumer price indicator increased 0.6% in May after 0.8% in April and 0.6% in March. That is a big run of inflation for three months.
The core measure, which excludes energy and food costs, has been on a roughly parallel track with 0.7 increase in May following a 0.9% in April and 0.3% in March.
Graph at the top of this page shows the change in the primary inflation indicator, and the core index along with a 12 month average of the monthly change.
You can see a large drop in prices during the pandemic followed by spikes over the next several months. Price changes returned to normal range in the September 2020 through February 2021 timeframe.
What is behind those numbers? Let’s check out the Wall Street Journal’s narrative:
Heavy bomber crewman, U.S. Army Air Force, World War 2. Photo from Legacy Flight Museum in Rexford, Idaho by James Ulvog.
Our freedom is under rapidly increasing assault by many politicians who think they are kings and queens appointed by divine right instead of having merely won a few more percentage points of the vote than their opponent in the last election. In the last year public health officials at the federal, state, and county levels who lack self-awareness of how often they beclown themselves have joined in the efforts to shred our liberty.
As a result of these attacks, it is ever more important that on this Memorial Day we remember those who shed all their blood so that we may be free.
A ‘thank you’ from me is so trivial, yet that is all I have.
I will demonstrate my appreciation for freedom purchased by others by exercising freedom.
Yesterday I exercised my freedom of religion. Tomorrow I will exercise my economic freedom, also called pursuit of happiness, by running my business the way I choose.
I have posted variations of the following ideas several times before. I will continue to make these points routinely.
Union Infantry private, U.S. Civil War, 1961-1865. Photo from Legacy Flight Museum in Rexford, Idaho by James Ulvog.
While touring the U.S.S. Midway Museum in San Diego early this month, I wore a “U.S. Air Force” ball cap with various stuff pinned to it, such as the rank I wore, a missile badge (“pocket rocket” for those who know), SAC logo, and a rectangular piece of metal that declares “Combat Crew.”
During the course of walking around, I got lots of glances and several comments of “thank you for your service.”
Also got some joshing comments from the retired Navy guys about them ‘allowing’ me on their ship. Since we were all on the same team back in the day, the kidding was pure fun.
I was on active duty for only four years and that was decades ago. I never got within 3,000 miles of hostile action. (Of course if the flag had gone up, I would have been radioactive dust at 20,000 feet altitude about 40 minutes later.)
As a result, I was uneasy for a long time when someone said “Thanks for your service.”
It took me a few years to get to get comfortable with those comments.
I now graciously and proudly accept those expressions of appreciation from my fellow Americans, but not because of what I did so long ago.
Another way to keep track of inflation trends is by watching the price index for the Personal Consumption Expenditure.
Please journey along with me as I continue my education.
In the news yesterday was the April increase which showed a 3.1% year-over-year increase compared to an expectation of a 2.9% increase. For one article discussing the news, check out the following:
I have started to track this data, gathering information back to the start of 2020. The month by month change in the headline index and the core index (which excludes food and energy costs) can be seen in the graph at the top of this post.
Before look at the year-over-year change, we need to look at the nature of the index. There are two main indices used to monitor inflation. The first is the Consumer Price Index (CPI) which everyone knows about. The other is the Personal Consumption Expenditures (PCE).
Since my last post on 4/30/20, a month ago, there has finally been visible progress in the number of people losing their job.
Since 4/24/21 the number of new claims for unemployment has dropped from 590,000 to 406,000 in the week ending 5/22/21. Graph above shows improvement. Average had been running around 800,000 from early October 2020 until late in February 2021.
The number of new claims is still double the average from before the pandemic. As recently as February it was four times, so that is progress. From quadruple for oh so many months to merely double is good. Not great for all those people losing their job now, but at overall level it is progress.
Purpose of these posts on economic statistics is to help all of us sort out what is going on in the overall economy.
Revised number of new claims in state programs over the last four months:
754K – 2/27/21
728K – 3/27/221
590K – 4/24/21
406K – 5/22/21
Following graphs show the ongoing human cost of the economic shutdown.
New claims
New claims for unemployment by week since the start of 2020:
Let’s dial up the quality of our A&A work. Image courtesy of Adobe Stock.
The AICPA’s Auditing Standards Board is proposing a massive overhaul of the Quality Control Standards.
Who will this affect? All CPA firms who provide any audit, review, compilation, preparation, or attestation engagements. In other words, anyone with any accounting & auditing work.
As a mere starting point, the new standards will be relabelled as Quality Management Standards. Instead of QC system, we will now have a QM system.
As a reminder, QC or QM standards apply regardless of whether you go through a system review or engagement review during your tri-annual peer review. The QC/QM system is tested in a system review but you still must have a formal QC/QM system even if you only do comps and reviews.
This post will provide a quick mention of what I see as the three biggest changes followed by a lengthy summary.
Major changes
A massive change that will impact small firms is that the annual inspection (which is currently required and will continue to be required) may not be performed by anyone who worked on the engagement.
For one person firms, this will require us to get someone outside the firm to perform the annual inspection. Two or three partner firms where the partners do essentially all of the work will also have to get someone from outside to do the inspection.
Two of the other changes of note: new risk assessment process and annual evaluation of quality management system.
The risk assessment process will require establishing quality objectives, identifying risks to achieving those quality objectives, and implement responses to address the quality risks.
After a one year delay to allow running the new QM system for a while the new requirement of an annual assessment of the QM system will kick in.
Proposed effective dates
The first Statements on Quality Management Standards, referred to as SQMS #1, is proposed to require the new quality management system be designed and implemented by December 15, 2023. The first annual evaluation of the system of quality management is proposed to be required within one year following December 15, 2023.
Rephrasing the effective date, the new QM system has to be in place before the end of 2023 (by 12/15/23 to be exact). That is about 2½ years from now. The first annual evaluation will be required one year after that, by the end of 2024 (specific deadline 12/15/24).
(Cross-posted from my other blog, Nonprofit Update, not because CPAs need this information, but because it might be helpful for your clients. You might also be able to use this illustration as a tool to explain different service levels to your clients.)
Let’s think about a football team and how they are positioned for scoring the winning points in the last few seconds of a tied game. They could be 4th-and-goal or perhaps not yet to a position for a field goal attempt.
Let’s use that illustration to explain the services provided by your outside accountant.
A CPA can provide four levels of services if you’re looking for financial statements.
You can hire a CPA firm to provide:
audit,
review,
compilation, or
preparation service.
What is winning the game?
We all know what that is in football.
In our accounting illustration a winning score would be perfect financial statements. Every number is correct. Not just close-enough, but exactly correct. Every disclosure complies with every single requirement. The presentation and classification are picture perfect.
That probably never happens in real life, so let’s simplify it by saying that there is nothing even close to materially incorrect in any number, presentation, or disclosure. The financial statements are as close to perfect as is humanly possible.
That is what a win looks like.
Audit
Let’s say there is under a minute left in a tied game. Our favorite football team has just completed a successful drive and is sitting on the 1 yard line on fourth down. There’s only one play left in 30 seconds and the game is over.
Likelihood of getting a touchdown and winning the game is pretty good. Right about now the odds look incredible.
Previous post suggested It’s time to start monitoring inflation. The dramatic increase in inflation rate in March and April 2021 suggests we need to be watching the inflation numbers more closely.
Not only does this help us generally understand what is going on around us, but specifically it helps us understand and interpret our clients’ financial results as we provide audit and review services.
A few articles I have found helpful in the recent weeks providing context on the inflation environment:
5/5/21 – Wall Street Journal – Everything Screams Inflation– Columnist senses a possible shifting point from the low inflation we have seen for a very long time, going back to a sustained period of high inflation.
He cites five general trends which point towards years of high inflation:
As CPAs, we pay attention to economic trends because those have big impact on our client’s operations. Understanding what is happening in terms of interest rates, growth or shrinkage in the GDP, unemployment trends, and real estate prices also helps us interpret financial statements during and audit or review.
It is time to start monitoring inflation rates.
Graph at the top of this post shows worrying information about inflation.
This follows a downward revision to the March data.
Leisure and hospitality (that means entertainment, hotels, and motels) saw most of the growth in April. In more detail, there are 331K new jobs in those sectors which offset a net decline of 65K in all other sectors.
Article repeats the comment seen in many of other articles that employers are having a hard time attracting new staff.
….what you do not want to have happen to your license. Image courtesy of Adobe Stock.
Update #92 newsletter from California Board of Accountancy dated winter 2021 lists 14 disciplinary actions summarized below. This tally excludes one listed action which is ending probation for a CPA and another separately listed case for the corporation owned by an individual who is also disciplined.
All these actions are effective at various times during November and December 2020.
Easter is the high point of the year for Christians. On this day our Savior rose from the tomb after having suffered a brutal death at the hands of the Roman government, urged on by the religious leadership.
What’s the big deal?
On Good Friday, the death of Jesus paid in full the penalty for my sins, yours sins, and the sins of every person who ever lived or ever will live.
On Easter Sunday, His glorious resurrection proves his sacrifice was accepted by God the Father.
In rising from death, Jesus proved he had ultimate power over death, hell, and the devil.
By that sacrifice, our sins are forgiven, and we will enter heaven for eternity, not because of what we do or how nice we are, but solely because of His sacrifice on the cross.
A few selections of the wonderful and so comforting hymn Jesus Christ is Risen Today to help you celebrate. Go ahead, crank up the volume. First up is an organ only version:
This blog does not discuss politics. Since I do discuss space exploration, I will cover an announcement from the new Biden administration that Boeing will be replaced as the prime contractor on the Space Launch System.
The number of new claims for unemployment for week ending 3/13/21 increased 45,000 after decling 29,000 the prior week. Those weekly changes are in the range of what has happened over the last six months. In other words, not a lot of improvement with plenty of ups and downs in the weekly new-claims tally.
Since 8/29/20, the new weekly claims ranged from a low of 711K to high of 965K. average since then is 812K. That means weekly new claims have been bad news for seven months in a row.
For context consider before the economic shutdown the new claims averaged about 220K per week, so after all these months of improvements we are still running about four times the previous norm.
Why this ongoing discussion?
If we’re going to understand what is happening in the economy we need to dive deeper into the numbers. For those of us who are CPAs providing audits and reviews, it helps us to have a deeper understanding of the overall economy.
Ponder the following graphs and you can make your own assessment.
