{"id":1758,"date":"2020-06-11T12:18:55","date_gmt":"2020-06-11T16:18:55","guid":{"rendered":"https:\/\/naroffeconomics.com\/?p=1758"},"modified":"2020-06-11T12:18:55","modified_gmt":"2020-06-11T16:18:55","slug":"jobless-claims-and-may-producer-prices","status":"publish","type":"post","link":"https:\/\/naroffeconomics.com\/?p=1758","title":{"rendered":"Jobless Claims and May Producer Prices"},"content":{"rendered":"\n

KEY DATA:<\/strong>  Claims: 1.54 million (-355,000); Continuing\nClaims: 20.93 million (-339,000)\/ PPI: +0.4%; Foods: +6.0%; Energy: +4.5%<\/p>\n\n\n\n

IN A\nNUTSHELL:<\/strong>  \u201cLayoffs are slowing, but the level of people\nstill applying for unemployment payments remains incredibly high.\u201d<\/em><\/strong><\/p>\n\n\n\n

WHAT IT MEANS:<\/strong>  Given\nthe surprising May jobs report and the widespread reopening of the economy, the\nunemployment claims and continuing claims numbers have taken on new importance.\nNew\nunemployment claims declined for the tenth consecutive week, which is the good\nnews.  However, the number of people\nbeing laid off remains extraordinarily high.<\/em><\/strong>  There is really nothing good about having one\nand a half million more people becoming unemployed.   The number of workers who are receiving\nunemployment checks also fell, but the level remained above twenty million, a\nsign that the labor market is coming back but is still hurting.<\/em><\/strong>  The Bureau of Labor Statistics admitted that\nthere was a misclassification in the data and the unemployment rate should have\nbeen a lot higher ion both April and May. \nOnce the reopenings are largely complete, or as complete as they will\nget, the claims numbers have to drop below 350,000 before we can have\nconfidence that the decline in the unemployment rate will continue\nunabated.  Since that is not likely to\nhappen for quite some time, the unemployment rate could remain in double\ndigits for much of the remainder of the year. \n<\/em><\/strong><\/p>\n\n\n\n

Wholesale prices jumped in May<\/em><\/strong>, which was a surprise.  What was not that great a surprise was the\njumps in food and energy.  Meat\nshortages led to the wholesale price of beef and veal to surge by 69%<\/em><\/strong>\nand as every shopper knows, those costs have been passed through to the\nconsumer.  Crude oil prices (West Texas\nIntermediate) jumped by almost 73% in May, so the wholesale surge in energy\ncosts also made sense.  Excluding those\ntwo sectors, though, the prices of wholesale goods were flat.  <\/em><\/strong>On the services side, there really\nwas minimal inflation pressure except from airlines starting to increase their\nprices from the rock bottom levels they had been.  <\/p>\n\n\n\n

IMPLICATIONS:<\/strong> In May, for the first time since\nthe unemployment numbers were created in 1967, the number of people receiving\nunemployment checks (continuing claims) exceeded the number of people\nunemployed.  That, of course, makes no\nsense since you have to be unemployment to remain on the unemployment\nrolls.  That is the clearest indication\nthat BLS, which produces both of those numbers, got the May unemployment report\nwrong.<\/em><\/strong>  They admitted that the\nmisclassification of data started in March and the unemployment rate was\nunderstated by one roughly percentage point in March, five in April and three\nin May.  Assuming that BLS will finally\ncorrect the classification process in June, you have to use an unemployment\nrate of approximately 16.4%, not 13.3%, when comparing the May to June\nnumbers.  <\/em><\/strong>That would be the\napples to apples comparison.  Given\nthe size of the labor force, three percentage points means about 4.75 million\nworkers have to come off the rolls before we can cut into the reported 13.3%\nrate.  <\/em><\/strong>That could happen in June,\nbut it also means that the decline in the rate might be minimal.  <\/p>\n\n\n\n

But the real news came from Fed Chair Powell.<\/em><\/strong>  His press conference yesterday was a classic\ntwo-handed economist approach.  On the\none hand, he made it clear the Fed would be providing massive amounts of\nliquidity to the system for an extended period. \nThe Fed\u2019s Summary of Economic Projections (SEP) table showed the funds\nrate at the current level through 2022.  <\/em><\/strong>But\nthen he produced the other hand.  He\nnoted that millions of workers might never return to their old jobs,<\/em><\/strong>\nimplying that getting back to February\u2019s 3.5% unemployment rate was not likely to\nhappen for who knows how long.  It is\nlikely that the unemployment rate will not get below double-digits until the\nlast quarter of the year.  The GDP growth\nforecast<\/em><\/strong>, which showed solid gains the rest of this year and next,\nstill implied that we would not get back to the 2019 fourth quarter level\nuntil spring 2022, two years from now.<\/em><\/strong> \nAnd all that is occurring without any assumption of a second wave of the\nvirus, which the FOMC did not discount in its statement.  Basically, Mr. Powell let everyone know that\nthe Fed will do all it can, but the best it can do is limit the damage.<\/em><\/strong>  That is a sobering message for investors, who\nwere assuming that everything is beautiful and the virus was a nonevent.  We will see if politics takes over the future\ncourse of fiscal policy, as it seems to be doing.  My concern has always been what will happen\nwhen the economy has to stand on its own. \nStretching out that time frame will be up to our political leaders,\nwhich means putting politics aside.  Good\nluck with that.   <\/em><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

KEY DATA:  Claims: 1.54 million (-355,000); Continuing Claims: 20.93 million (-339,000)\/ PPI: +0.4%; Foods: +6.0%; Energy: +4.5% IN A NUTSHELL:  \u201cLayoffs are slowing, but the level of people still applying for unemployment payments remains incredibly high.\u201d WHAT IT MEANS:  Given the surprising May jobs report and the widespread reopening of the economy, the unemployment claims … Continue reading Jobless Claims and May Producer Prices<\/span> →<\/span><\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[],"class_list":["post-1758","post","type-post","status-publish","format-standard","hentry","category-economic-indicators"],"_links":{"self":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1758","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1758"}],"version-history":[{"count":1,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1758\/revisions"}],"predecessor-version":[{"id":1759,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1758\/revisions\/1759"}],"wp:attachment":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1758"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1758"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1758"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}