The unemployment level is still at Great Depression levels. Labor market deterioration through summer could ignite new concerns of permanent job loss and deep economic scarring from the virus-induced recession.
At the moment, confirmed virus cases are surging, and states are pausing and or reversing reopening plans, as consumer foot traffic across the country is stalling. Workers that were just rehired are being fired in some regions. These emerging trends suggest the recent bounce in economic growth could form a "W" rather than a "V" shaped recovery.
Tens of millions of workers are jobless and are collecting unemployment insurance compared with pre-COVID-19 levels. Layoffs once temporary are becoming permanent.
The number of permanent job loss now stands at nearly 3 million in June, up from 1.6 million people in February.
BLS: "The number of permanent job losers continued to rise, increasing by 588,000 to 2.9 million in June."— zerohedge (@zerohedge) July 2, 2020
And why is this? Well, here's a good example: Yelp made a shocking claim last week that said: 41% of all business closures on its platform are permanent closures.
"Our data shows the largest spikes of permanent closures occurred in March, followed by May and June, indicating that the businesses that were already struggling had to permanently close right away and the businesses that were trying to hold on, but unable to weather the COVID-19 storm, were forced to shutter in recent months."
About half of all small businesses are expected to close within the next six months, according to a recent survey - that means more permanent job loss. If readers didn't know, mom and pop shops generate the majority of US jobs.
There are signs the recovery is stalling:
Macro research firm Capital Economics shows consumer foot traffic has stalled as cases surge and reopenings paused.
"Don't let the size of the rebound confuse you — it's still a partial rebound as more [temporary] layoffs convert to permanent," Arindrajit Dube, a professor of economics at the University of Massachusetts Amherst, tweeted."And a lot of headwind already coming our way [new closures]."
Like I said.— Arindrajit Dube (@arindube) July 2, 2020
Don't let the size of the rebound confuse you - it's still a partial rebound as more temp layoffs convert to permanent. And a lot of headwind already coming our way (new closures). https://t.co/LB09BqbLCS
Unless the Federal Reserve's balance sheet continues to expand, what we mean is that it's been shrinking for three weeks, the stock market could be in for a rude awakening about the true employment situation that will have long-lasting negative effects on consumption.
Permanaent Job Loss (inverse) vs. S&P500
Permanent job loss is a consumption killer, something the stock market in the past has sold on, though the Fed's aggressive balance sheet expansion has suspended stocks at record high valuations, this manipulation cannot last forever as the economy is likely to stumble into a mulit-year downturn.