Goldman Explains Why The Job Loss Trend Is A Deterioration Not A Distortion, Asks If Maximum Welfare Now Is 198 Weeks

Tyler Durden's picture

Goldman's Andrew Tilton has nothing good for the factless pumpers of the recoveryless recovery: "The timing of the rise in new claims fits with the surge in extended benefit recipients (although as already noted the auto distortion probably had its largest downward impact on claims in that same week).   This raises the question of whether some of the people who lost benefits due to funding problems reapplied via new claims, when in fact they simply should have gone back on the benefit rolls without the need to file a new claim.  It is difficult to know for sure whether this has happened.  Our Labor Department contact thought this also would be minor.   In our view, the fact that claims have continued to rise in the first two weeks of August, even though total benefit recipients were already back at spring levels by late July, casts further doubt on this re-filing hypothesis as a major factor, as most eligible recipients should have re-filed by now.  Certainly, any further increases in new claims – or simply a persistence of these high levels – would suggest that the labor market has in fact deteriorated further.  In short, we need to see a fairly quick reversal of the recent increase in initial claims to sign onto the view that distortions were principally responsible for this apparent deterioration in US labor market conditions." In other words, those who are trying to misattribute the surge in initial claims, and cast the economy in a rosier light, can only do so by blaming government error and inefficiency in reassigning existing claimants to initial status. This is a scary possibility, as it means that those on the verge of exhuasting their 99 weeks of maximum benefits may have found an unexpected loophole to make the length of the "welfare state" support up to 198 weeks (or double the existing max). While it goes without saying that the economy is double dipping, the fact that those who would at least have been forced to look for a job at the end of 99 weeks of welfare subsistence may have doubled their benefits' duration should raise major red flags. However, that this occurred as a function of governmental incompetence is no reason for surprise whatsoever.

More from Andrew Tilton:

Rising Jobless Claims—More Likely Deterioration than Distortion

  • Initial claims for jobless insurance rose to an even 500,000 in the week of August 14, the highest level since last November.   Data for extended benefits show that the total number of people receiving jobless benefits climbed back above 10 million in late July, though that figure remains below the peak of 10.7 million reached in the first quarter.
  • Two special factors could be contributing to the recent increase in initial claims, but in both cases the effects are apt to be minor at best.  First, temporary Census employment continues to decline, and it is possible that some of these people are filing for benefits.  Second, the recent renewal of funding for extended benefits may have encouraged the jobless to file (or re-file) new claims.  Distortions from a third factor—the absence of normal auto plant shutdowns—should already have run their course.
  • Neither of the potential mitigating factors would explain the persistence of claims at current elevated levels through August, so the upcoming claims data will be particularly important to watch.  Absent a quick reversal of the latest increase, our conclusion is that claims signal that US labor market conditions have deteriorated modestly in recent weeks.

Jobless claims have been a major disappointment in recent weeks, with the number of seasonally adjusted new claims rising from a 2010 low of 427,000 in the week of July 10 to a nine-month high of 500,000 in the week of August 14.  At the same time, the total number of people receiving jobless benefits rose back above 10 million, not far from its all-time high of 10.7 million set earlier in the year.  One concise summary of the disappointment is that US-MAP readings for initial claims have not been positive since at least July 1.

Many market participants question the reliability of the recent increase in initial claims, citing several potential distortions over the past couple of months.  First, a wave of temporary Census hiring in the springtime came to an end in early May, with most of those workers now back on the job market.  Second, Congress allowed funding for extended benefit programs to lapse in early June, with the result that the number of people on such programs plummeted in June and July; the benefit rolls have surged again with the recent renewal of such funding, and some returning recipients may have re-filed initial claims.  Third, many vehicle production plants kept humming through the summer instead of taking downtime for annual retooling, with the result that seasonally adjusted employment in this sector looked better for a brief period in early July. (This probably explains the brief dip to 427,000 claims mentioned above.)

Of these three factors, only the first two are candidates to explain the recent increase in claims, as any seasonal distortions from the different vehicle production schedule should have washed through a few weeks ago.  Taking each in turn:

1. Census hiring.  The federal government hired hundreds of thousands of temporary workers to help with the decennial Census.  The number of such workers on the payroll peaked at 585,000 in early May; by the first week of August (the latest period for which data are available), this figure had dwindled to 73,000.  In other words, over the past three months more than half a million people who worked on the Census either a) found other work, b) dropped out of the labor force, or c) are now officially unemployed.  To the extent these former Census employees wanted another job but could not find one—i.e., fell in group c—they might have filed for jobless benefits.

In theory, then, it’s possible that the wind-down of Census employment could have contributed to the recent increase in jobless claims.  In fact, claims did increase in August of the last two Census years (though in 1990 the increase probably had more to do with the fact that a recession began the previous month).  However, there are two problems with this theory.  First, most states require potential beneficiaries to meet minimum requirements for periods of prior employment and pay levels in order to be eligible for jobless claims; in most instances a Census job alone would not qualify a person for benefits.  While many Census workers undoubtedly have had prior spells of employment, others might not have done so recently enough to be eligible.  Second, the bulk of this year’s Census jobs ended by late June (by which time total temporary Census employment had already fallen to less than 200,000), yet jobless claims that month remained roughly in line with May levels.  So it would be strange for the relatively smaller decline in Census employment in recent weeks to prompt a surge in new claims.  Discussions with a spokesman for the Department of Labor suggest that while an impact from Census workers cannot be ruled out, it is apt to be trivial for these reasons.

2. Renewal of funding for extended benefits.  Congress allowed funding for extended jobless benefits to lapse in early June, with more than 1½ million people falling off the rolls by early July (see the exhibit below).  Over the past few weeks, claims have jumped again after funding was renewed through November.  The trough in the number of benefit recipients occurred in the week of July 10 – the same week as the trough in the number of initial claims.  Since then, the number of total benefit recipients has climbed back to roughly its level in May, just over 10 million as of the end of July; over this same period, the number of new claimants rose from 427,000 to 482,000.  (As a reminder, the jobless claims report released each Thursday covers initial claims data for the prior week, continuing claims data for the week preceding that one, and extended benefits with a yet another week’s lag.)

Exhibit: Total Jobless Claimants Rise Back Above 10 Million As Emergency Benefits are Renewed

The timing of the rise in new claims fits with the surge in extended benefit recipients (although as already noted the auto distortion probably had its largest downward impact on claims in that same week).   This raises the question of whether some of the people who lost benefits due to funding problems reapplied via new claims, when in fact they simply should have gone back on the benefit rolls without the need to file a new claim.  It is difficult to know for sure whether this has happened.  Our Labor Department contact thought this also would be minor.   In our view, the fact that claims have continued to rise in the first two weeks of August, even though total benefit recipients were already back at spring levels by late July, casts further doubt on this re-filing hypothesis as a major factor, as most eligible recipients should have re-filed by now.  Certainly, any further increases in new claims – or simply a persistence of these high levels – would suggest that the labor market has in fact deteriorated further.  In short, we need to see a fairly quick reversal of the recent increase in initial claims to sign onto the view that distortions were principally responsible for this apparent deterioration in US labor market conditions.

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saulysw's picture

A business plan idea : Employ the long term unemployed for a month at low wages to reset the clock, and allow them to start claiming the 99 weeks again. Take a % of their new returns for this "service". Is there a reason this would not work?

Mad Max's picture

1) It's almost certainly illegal and probably violates a wide range of both state and federal laws.

2) In my state you must be continuously employed for a longer period (I think 6 months, but it might be only 3) before you are eligible, or again eligible, for unemployment.

3) The amount of unemployment pay is based on your wages at the most recent job, so this would decrease their unemployment pay for the next bout.

Having said all that, I'll bet it's already being done many places.

tmosley's picture

It is my understanding that the company that lays off a worker must pay for some portion of their unemployment.  As such, there is an incentive not to lay off workers unless absolutely necessary.

Johnny Bravo's picture

The company doesn't pay directly, they pay through FUTA and SUTA.  Companies that file claims have these rates increase for them.

They don't pay directly, but they do have to pay increased insurance rates if people use unemployment.  It's kind of like workman's comp in a way.

anony's picture

The only thing wrong with Goddamn Sux' question of Max U/employment is their refusal to recognize PERMANENT U/employment growing each day, month and year until New Work is invented or we finally recognize that Kurt Vonnegut was right 35 years ago.

Meanwhile subsistence payments will be printed for decades if not millennia to come.

JohnKing's picture

Take Goldman off of welfare. Why are they still a bank holding company?

Widowmaker's picture

Exactly.

Andrew Tilton is just another incompetent welfare queen trying to distract from his own fraud-attachment to the taxpayer mammary gland in the sky..

Goldman is going on what 90 something weeks of welfare?

Hey Andrew Tilton, do us a favor - shut the f**k up and quit.

Chemba's picture

LOL.  You are intellectually incapable of even reading, never mind understanding, Andrew Tilton's analysis.  Your bandwidth does not extend beyond populist nonsense, which is why you will never work at Goldman Sachs, or any other firm that requires an IQ larger than shoe size.

Oh, let me guess, you would "never work at Goldman Sachs, evil squid, blah blah blah,...".  Yeah, right, I'm sure you'd hang up if they called.

Widowmaker's picture

Ha ha, good ones! I didn't know Tilton's boyfriend was on ZH.

Personal attacks aside, you didn't refute my point.

Only in America are "second-chances" literally for sale through appropriate political "agents."

 

sgt_doom's picture

Gee, commenting on completely fraudulent data --- as anyone with a couple of neurons to rub together and regularly exames the BLS data realizes -- makes a shitload of sense, huh, Chemba dood?

They always use specific "qualifiers" when publishing the unemployment data: (1) available work force (meaning ever greater amounts of people are being excluded, i.e., the impoverished, the homeless - including the working homeless, those who have falled off the UI ranks, etc., and (2) those all-powerful and manipulative "adjustments" -- get the picture, dood?

sgt_doom's picture

+1000 to the Widowmaker.

And in the same thoughtful pattern:

Larry Summers says, "Women can't do science and the recession is over."

Economics question from the above data:

Who has more chins?  Thomas "three chins" Friedman, or Larry "the Hut" Summers?

Lord Blankcheck's picture

 GS is a Finacial Holding Co. Since sept. '09.

Cognitive Dissonance's picture

I guess I'll try.

Question: Why is GS still a Financial Holding Company?

Answer: Because it's still the fastest and most effective way for GS to suck "Mother Samantha's" milk from the government teat.

Got milk?

Eternal Student's picture

+1.  And don't just stop at Goldman.

gosh's picture

I personally know someone who lost their benefits a couple months ago due to the extended benefits not being extended, when they later were she accidently reapplied for the second time.  It took a couple months or so but eventually the govt found out.  This thesis that people are applying anew when they shouldnt isnt a theory, its fact.

Cognitive Dissonance's picture

Then shouldn't we be seeing a rapid spike instead of a slow melt-up in claims?

There were a lot of people who fell off the dole when Congress didn't extend the benefits for a 6th time. And then it was nearly two months before they finally did. So if these people went many many weeks without checks, it stands to reason they would have been first in line when the 6th extension went through, thus creating a huge spike if they were mis-filed as new and not extended. 

Cognitive Dissonance's picture

In other words, those who are trying to misattribute the surge in initial claims, and cast the economy in a rosier light, can only do so by blaming government error and inefficiency in reassigning existing claimants to initial status.

You know things are bad when all the kings horses and all the kings men are desperately trying to find a way to put an unemployed Humpty Dumpty back together again.

 

Republi-Ken's picture

I have a great idea:

Let's De-Regulate the Financial Industry, Wall Street, And The Banks, and then there will be no more unemployment...

It's...So REPUBLICAN!

viahj's picture

while you're in the cafeteria fighting over the last piece of stale cake, the real war is being waged against us all outside in the real world.

John McCloy's picture

I would think very few if any of the new claims are census. I am fairly certain a large number if the unemployed were angry when they found out that they were no longer eligible for benefits if they took a seasonal part time holiday job.
So this should mean census hires if they had additional weeks in benefits remaining would no longer be eligible unless and exception was made.

Chemba's picture

More facts, analysis, insight and ugly bearish truths from the excellent economics team at Goldman Sachs.

Another blow to the Goldman Sachs narrative.

I give ZH credit for utilizing Goldman's good research (they have crap research as well, like other firms) despite the fact that it makes the constant blathering of the Goldman Sachs narrative seem such populist crap.

Tyler Durden's picture

Where do you get your facts from? We have long claimed that Goldman is precisely the (Fed-backed) monopoly (and the spin off of prop trading which we first demanded long before most of America had heard of it is a small first step in confirming this) it is, due to its impeccable information arbitrage opportunities courtesy of being second to none in seeing the entire big picture OTC flow traffic before anyone else. Not to piggy back on it, via research and otherwise, would be stupid. Or we could keep the information, trade on it and not disseminate it, putting up one or two posts a day as we with slideshows. Yes, in the process we would lose all readers (which would also mean no place left for you to praise Goldman). The fact that Goldman may use this and any other information it has access to for less than sterling goals is a very warranted "narrative", feel free to ref: recent civil and criminal activity against the firm, and the abovementioned prop trading spin off.

Your logic is so flawed it is painful - not use Goldman, or someone else's research, just because there are issues with ethical conduct means not to present primary data so that others may form their secondary opinion? Are you serious?

You realize if you want to make a favorable impression with your constant brown-nosing of the firm you have picked the wrong blog - ZH continues to be blocked at 200 West.

Cognitive Dissonance's picture

You realize if you want to make a favorable impression with your constant brown-nosing of the firm you have picked the wrong blog - ZH continues to be blocked at 200 West.

LOL

ZH may continue to be blocked at 200 West but apparently brown noses are always welcome. Walk-ins are encouraged by waving security checks of purses and over-the-shoulder European man bags.

Not that there's anything wrong with that.

Screwball's picture

Man bags CD?  Tell me you don't carry a man bag. :-)

Cognitive Dissonance's picture

Wouldn't be caught dead with one. Not that there's anything wrong with them.

Sadly, I am beginning to show some man boobs. Does that count? :>)

chinaguy's picture

"not use Goldman, or someone else's research, just because there are issues with ethical conduct......."

My thoughts exactly. Wake up & smell the coffee.

Your family has your back, If you are lucky....everyone else would smoke you for a 50 BPs.

Chemba's picture

ZH claims that Goldman disseminates lies, half-truths and/or misleading opinions in order to benefit its proprietary book, to the detriment of its clients.  According to the narrative, Goldman expresses a firm view publicly, for its clients, that is contrary to its "real" firm view, and that the lies benefit Goldman.  OK, I see.

So then why would ZH post Goldman Sachs research as having any useful insights since it just "lies" and "manipulations"?  You would never be able to untangle the "triple-double-inverse reverse psychology" embedded, so what is the point?

Is ZH pulling back from the narrative?  Is the narrative now limited to "unethical behavior" by certain trading desks?  Is it now the case that Goldman's various analysts actually share their real analysis, insights and conclusions w/o any concern for the firm's proprietary positions?  That it is just a few rogue traders or product structurings?

As to making a favorable impression with the firm, that was already accomplished long ago.

I am only pointing out the ridiculousness of elements of the narrative.

Otherwise, keep up the great work!

Tyler Durden's picture

If you are unable to untangle the "triple-double-inverse reverse psychology" of the Goldman reports, don't read them. Otherwise do, for their obvious informational value. What you do with that information is up to you, especially as you keep in mind the track record of Goldman's sellside advice.

Chemba's picture

I don't need to untangle any "triple-double-inverse reverse psychology" because it does not exist.

I accept Goldman Sachs research for what it is: one analyst's, or one desk's, or one group's (e.g. Econ) opinion, based on its analysis.  It is based on nothing other than that, and has nothing to do with what is happening on the other side of the wall(s).

Those opinions, like everyone else's, are sometimes right, often wrong.

The track record of Goldman's sell side research is like that of every other firm; spotty at best, usually chronically late.  There are structural reasons why sell side analysts are often wrong on their calls, including fact that the public nature of their calls and persona make them slow to change their views based on facts.

Cognitive Dissonance's picture

Yup, there's a Chinese wall built around every cubicle over at GS. And BoA and so on and so on.

They must be good because the exact same one over in China has lasted for hundreds of years.

caconhma's picture

 Chemba,

Did you ever hold a meaningful employment at any mid- or large-size companies?

Nothing is ever leaving corporate walls without being reviewed and approved by at least your boss and a legal department. Anybody below a VP level "follows" the party line. Legally, any corporate employee is a "company representative".  Certainly, there is a "room to play" but it is within the company boundary.

In developing an intelligent judgement, you never ignore any info regardless of its source(s). Only analyzing the info, one takes into considerations the source(s) credibility and potential agenda. Finally, even a broken clock twice a day shows a perfectly correct time.

As for Goldman, their business success tells you that they have a quite good idea of what is going around.

VWbug's picture

but goldman is an evil squid and everyone who works for them is part of the matrix, and have chosen to be evil, so this whole analysis must be another disinformation game that is part of a much bigger plan to bankrupt the entire world and then rule over it like fuedal lords.

i would ignore it.

/sarcasm off

MichaelG's picture

I did think they were an archetypal example of the faults of our current economic system - not evil, just good at taking advantage of the invisible hand-on-the-scales - but in the face of your withering sarcasm I now realise they are simply doing God's work.

How's Johnny Bravo doing?

Cognitive Dissonance's picture

LOL

How's Johnny Bravo doing?

As best as I can tell, old JB's suffering from multiple (online) personality disorder.

VWbug's picture

i know it somehow helps you all to think only 1 person in the entire world thinks you are all depressed, socially dysfunctional, scared, envious incompetents, so i hate to burst your bubble, but i did see johnny b say something about inflation equalling growth or some such nonsense which i completely disagree with.

i am a good austrian you see.

Anyway, continue to call me a shill, a troll, another poster (as if that means anything, lol), but whatever you do, don't open your mind to the possibility you are just wrong.

hopium bitchez!

Johnny Bravo's picture

I know, right?

These people are all under the fantasy that they're so right that only one person in the entire world is capable of disagreeing with them.
It's kind of pathetic.

They think that because their opinions are the majority on a blog where everybody agrees with each other without much thought that the world works that way too.

There are plenty of people that find the claims of gold bugs ridiculous.  In fact, they're a fringe element as far as investing is concerned.

And now that gold got its 61.8 fib instead of its 50 fib, they think that "JB was oh so wrong."

It's funny.  They try to taunt you when you're off by like 1% or something, yet continue to pay 1300 bucks for an asset that is worth nearly 8% less.  (Oh, is it 7% less than you paid for it now?  Wow.  You're in the money!  You've only lost a year's worth of returns the minute you buy gold.  What a sound financial decision... )

Cognitive Dissonance's picture

JB, stop talking to yourself and fetch me a beer.

Cognitive Dissonance's picture

Now now JB, you know that's lemonade. But around the corner fudge is made. So pull your thumb out and help yourself just like you normally do on ZH. :>)

Cognitive Dissonance's picture

I wasn't talking to you VWbug. But since you seem to have self identified yourself with JB, I guess that's OK.

Johnny Bravo's picture

That's because anybody who is "against" gold is automatically accused of being me, regardless of whether that's actually even a realistic idea.

VWbug's picture

many people have called me johnny b, usually only when they run out of arguments.

i wish i was johnny b, it'd be nice to be young again, with a long, bright future ahead.

some advice johnny b: don't hang around here too much, these guys bring you down.

It's seriously depressing to read how everyone is against them, how the world doesn't make sense, how they can't wait to shoot and lynch people.

other than that, it's entertaining to see how their minds work.

Being the contrarian i am, they almost have me turned into a bull from a bear in 3 short weeks.

VWbug's picture

I wasn't talking to you VWbug. But since you seem to have self identified yourself with JB, I guess that's OK.

gee einstein, but the guy above you did make the insinuation, again, have a few comprehension problems do ya?

So tell me, does having the mind of a child come handy in your line of work?

please, please don't tell me you are some kind of psychologist, i couldn't get past more than 1 paragraph of the drivel you wrote, so i really don't know.

maybe a child psycholigist?

anyway, i guess zh is a good place for you to troll for clients.

traderjoe's picture

Why do you bother coming and posting then?

I visit different blogs for different perspectives from time to time. When I disagree with the central meme of the blog I usually don't post a comment. Do you really think you are going to convince ppl with your pithy comments?

JB- I'm so sick of your 8% premium comments. Absolute blather. I can buy large gold bars for 1% premiums, shipping included. The price quoted for spot is before processing, shipping, etc. No different then buying any other finished good at a retail price. And when you sell the coins back, you get most of the premium back. A 1-2% bid-asked spread is wide, but not absurd. I'll listen to another "gold is going down" argument, especially in a liquidation cascade, but the 8% reason is dumb. 

Johnny Bravo's picture

Also, a price goes up 3%, that is inflation.
Due to the price going up 3%, the company's revenue for that period grew 3%.

Inflation = growth.

How is that hard to understand for people?

Meridian's picture

When you are a paid shill do you get a lower rate for assuming an existing identity? Do only senior shills get to create new persona's?