Continuing Claims

Reality once again creeps back in, confirming that the 4 sigma beats in the economic indicators pointed out yesterday were mostly duds, except of course for the drop in the Employment index in the Chicago PMI. After a few brief weeks with a 3 handle in initial claims, initial layoffs once again jumped over 400k, to 402,000 in the Thanksgiving shortened week. As is now par for the course of the data fudgers at the BLS, the previous number was revised higher as is 100% the case always now on a weekly basis, from 393K to 396K. As a reminder, last week's forecast had been for a 388K print, so the 5k miss certainly looked better than an 8k, or 60% higher miss. Unadjusted claims was the silver lining, declining by 69.7k following the massive surge the week prior. Continuing claims also missed expectations, rising from an upward revised 3,705K to 3,740K, on consensus print of 3,650K. Probably most notable is the surge in EUCs as over 76k people dropped off continuing claims and had to file for extended benefits. Absent a further extension in the 99 week cliff at the end of the year, many people are going to lose their continuing continuing benefits. And going back to the BS from the BLS, as John Lohman's chart below shows that in 2011 initial and continuing claims have been revised higher the week following 91% and 100% of the time, respectively. A purely statistical explanation for this phenomenon is "impossible."

The decoupling desperation hits just keep on coming. After revising last week's 390k number as usual higher to 393K, today's soon to be revised higher jobless claims number hit 388k - the lowest since April, on expectation of 395k. Naturally the robots took one look at the number and completely ignored the fact that Europe's slow motion implosion continues because a few thousand people fired less apparently is good news. Naturally, that corporations, which have already cut all the fat and now have fewer and fewer people left to fire is of secondary importance. After all the decoupling thesis must survive at all costs because if not for America, which together with everyone else, has exported $338 billion more than they have imported - a mathematical idiocy which was noted yesterday - then the world is apparently doomed. And confirming just how "strong" the US economy is, or at least reports thereof, was both the continuing claims number which came in at 3,608K on expectations of 3,635K (previous revised of course higher from 3,615K to 3,665K), while housing starts and permits both beating expectations and coming at 628K and 653K, on expectations of 610K and 603K; even as both previous prints were revised lower. That multi-family units once again came at an abnormally high 183K is also irrelevant - 1 unit came virtually unchanged at 430k. But none of this matters: if the blistering economic data of this week, Ministry of Truthed as it may be, is not sufficient to convince the market that the US can decouple from the European catastrophe, nothing can. Naturally, if Europe is not fixed within one month, comparable "beats" in December will be simply ridiculous and completely non credible, and the BLS will be forced to actually report the truth on what the global slow down looks like.

Reality is just too complicated. So they give us a cartoon instead. 

The only question we have is how much higher will this week's 390K number be revised to next week in continuing the BLS one trillion sigma tradition of revising every prior number higher and never lower. As it stands, the 390K is the lowest since April, and a drop of 10K from both the previous print and expectations. In other news Non-seasonally adjusted claims increased by +29,106 to 398,753: this is the second highest number since July. What was also notable is that those on EUCs and Extended Benefits rose by 43K in the past week, an odd reversal to the now persistent issue of 99'ers hitting the cliff. In other news, the previous continuing claims number was revised worse by 24k from 3,683K to 3,707K which means today's 3,615K number will also see a downward revision soon. Regardless, no matter how one looks at this, the Claims number confirms there is no net job creation, and considering the bloodbath on Wall Street that will occur over the next month which will affect very high paying jobs, the bottom is about to fall out where it hurts the most: tax collections, which means the government will once again be forced to do what it does best: print paper, with the Fed firmly in tow to monetize it. Same old song.

When we discussed last week's intiial claims number we said, "In today's weekly dose of BS from the BLS, we get the previous week's massive beat of 401K revised to 405K, cutting the 410K estimate beat in half. But what is important is that the expectation for this week of 405K was once again "massively beaten" by a whopping 1K at 404K. Of course, next week this number will be revised to 408K meaning the consensus was  missed but no robots will care." Sure enough, last week's beat was enough for 5 ES points. And even surer enough, we were spot on: last week's 404K "beat" was just revised to a 409K "miss." As for this week's soon to be revised upward number, it came at 403K, missing expectations of 400K, but sure enough, suddenly a "much better" number than last week's revised 409K. Just how dumb does the BLS think everyone is? The bottom line is that claims continue to be persistently higher than 400K, now something like 25 out of 26 weeks in a row, which means there is no hope for any NFP improvements in the future.What is curious is that there was a pronounced deterioration in Texas, New York and California, which all saw a spike in layoffs, by 4,644; 8,568 and 13,882 respectively, due to layoffs in the manufacturing, service, retail and transportation industries. Said otherwise, the recession continues. In other news, continuing claims printed at a soon to be upwardly revised 3,719K, up from an upwardly revised 3,694K and worse than expectations of 3,690K. Last, and as everyone knows by now, the cliff issue is hurting ever more people, with about 68K people dropping off EUCs and Extended Benefits, down 1.6 million from a year ago.

• EU Bank Risks ‘Rapidly’ Growing, Andersson Says (Bloomberg)
• Inside the Fed Fight Over Bond Buys (Hilsenrath)
• France ready to give banks public capital (FT)
• Berlusconi Will Defend Government in Parliament as Confidence Vote Looms (Bloomberg)
• Germany urges treaty to strengthen bloc (FT)
• China's Appetite for Commodities Wanes (WSJ)
• China Exports Slow on ‘Severe Challenges’ (Bloomberg)
• Fed’s Plosser: Operation Twist is fiscal policy (Reuters)

• Steve Jobs "may never be equaled" (Reuters)
• Secret panel can put Americans on "kill list" (Reuters)
• Michael Lewis: California and Bust (Vanity Fair)
• Europe’s Rescue Fund is Only Last Resort (Bloomberg)
• EC To Propose Coordinated Action On Bank Recapitalization (MNI)
• SNB Foreign Currency Reserves Climb to Record (Bloomberg)
• Geithner Says Europe Debt Crisis Poses Risk to Global Growth (Bloomberg)
• Repatriation Tax Holiday to Be Proposed by Hagan, McCain (Bloomberg)
• China Tests US With Currency Move (FT)

Therefore this week's number is worse than last year, worse than the average of the past 5 years, and worse than the past 4 years since the depression began in terms of the increase in new claims since the previous week.

All you need to read.

Another day of statistics, where the headlines are widely published, some details are somewhat explored, and in-depth analysis is next to nil...

Following last week's somewhat twilight zone-like Verizon-strike-driven confusion, today's initial claims report (once again revised upwards) makes for 20 of the last 21 weeks above 400k and its highest (yet to be revised upwards) since 7/15.

• Obama to address Congress on September 8 (Reuters)
• China Says Fighting Inflation Is Priority (WSJ)
• Katia a hurricane; another storm likely in Gulf (Reuters)
• IMF and eurozone clash over estimates (FT)
• Japan’s New Leader Oversaw Biggest Intervention Since 2004 (WaPo)
• Asia feels impact of global slowdown (FT)
• Germany's Resiliency Buoys Europe (WSJ)
• EU Reaches Deal to Expand Syria Sanctions (WSJ)
• Goldman Takes Dark View in Private Note (WSJ) or is the European bailout really $1 trillion?

One of the oddities that seemed out of whack in this morning's weekly Unemployment Claims update was the explanation for the spike in this week's receipents of government generosity: apparently it had to do with the BLS handing out weekly benefits checks to striking Verizon workers. We will repeat the key word from that sentence because it bears repeating: "striking." Now, we may be wrong here, but if one is striking, one is not u-n-e-m-p-l-o-y-e-d, and hence the US government should probably not be using taxpayer money to double pay such individuals who have singlehandedly decided to forgo pay in return for making a labor statement. Otherwise, it kinda kills the whole "sacrifice" thing. And, lo and behold, as it turns out, we are not wrong. From JP Morgan: "Striking workers are generally not eligible to receive unemployment insurance benefits, but it looks like about half of the total amount of striking workers filed claims over these two weeks to formally determine their eligibility." Generally... except when the administration is willing to hand out money to anything and everything with a pulse. After all, there is that massive $2.2 trillion Bank of America balance sheet that has to be funded. And with direct reserve funding already failed, as per QE1 and 2, the only other possible way is via deposit increases. Alas, by the time this money could possibly be saved, it has been spent 5 times, the other 4 hitting Bank of America's bad credit card receivables department.

After taking a quick detour into pseudo-positive economic data, the BLS sends us right back into the depression, with an initial jobless claims number of 417, far higher than consensus of 405K (in fact higher than the highest number in the forecast range), and higher than last week's upwardly revised 412K. Naturally, the BLS is there to provide a justification for the spike, with 8500 jobs apparently "lost" due to the Verizon strike: "Special Factor: As a result of a labor dispute between Communications Workers of America and Verizon Communications, at least 12,500 initial claims were filed in the week ending 8/13/2011 and at least 8,500 initial claims were filed in the week ending 8/20/2011." In other news this is week 20 out of 20 with one or two exceptions of 400K+ prints. And to think that the August NFP number is due in just one week. In other news, continuing claims came below expectations of 3700K at 3641K, a number that will be revised higher as was last week's from 3702K to 3721K. The collapse in extended benefits, as the 99 week cliff claims more and more, means that 20K people fewer collected post Continuing Claims benefits, with those on EUC and extended benefits down from 5.8 million a year ago to 3.6 million: this is 1.2 million Americans that no longer can collect anything from Uncle Sam.

Following yesterday's upside surprise in the PPI, it was only logical that CPI would come higher than expected. However, printing at a 0.7% swing M/M, or the highest in years, was not expected. Broad CPI came at 0.5% in July after dropping -0.2% in June, or 3.6% Y/Y. This was far more than consensus which expected 0.2%. Core CPI however was in line with expectations at 0.2%. The reason for the surge? Gas, food and clothes. "The gasoline index rebounded from previous declines and rose sharply in July, accounting for about half of the seasonally adjusted increase in the all items index. The food at home index accelerated in July and also contributed to the increase, as dairy and fruit indexes posted notable increases and five of the six major grocery store food groups rose...The apparel index continued to rise sharply, increasing 1.2 percent in July; it has increased 3.9 percent over the past three months....The index for nonalcoholic beverages increased 0.9 percent in July as the coffee index continued to rise sharply." Elsewhere confirming that as expected the unemployment situation is deterorating, with 408K initial claims printing, on expectations of 400K, and making sure we dont have a revised 19 out of19 week of consecutive 400K+ prints was last week's revised 395K claims to, hold on to your seats, 399K.  That's right: a 1K in jobs breaks the trend, huzzah! Just as importantly, those on EUCs and Extended benefits continued to plunge, dropping by 43K in the last week. And most frightening, the one year change in Americans receiving Emergency Compensation (EUC) has plunged from 4.7 Million to 3.1 Million. That's 1.6 million Americans who no longer even collect any benefits from the government.