If Employment Has Bottomed….


If Employment Has Bottomed….

Posted by Karl Denninger

 … why is it that unemployment claims data fails to show improvement?

In the week ending April 3, the advance figure for seasonally adjusted initial claims was 460,000, an increase of 18,000 from the previous week’s revised figure of 442,000. The 4-week moving average was 450,250, an increase of 2,250 from the previous week’s revised average of 448,000.

That “4” handle doesn’t seem to be able to be hammered downward.  But more importantly is the data in the unadjusted numbers – we are seeing two very disturbing trends here.

First is that “extended benefits” spiked higher by 77,403 in the last survey week available in that series (March 20th) but also the EUC series is showing what appears to be a lot of people rolling off extended benefits.

The household data in the employment report (for March) did not disclose anything that would account for this EUC number that one could call “positive” – that is, it’s pretty clear that 300,000 people didn’t come off EUC programs into work in that week.

The obvious cacaphony to further extend unemployment (from the 99 weeks now possible in some states) will rise in volume with this report I’m sure, but unfortunately that sort of support is exactly backward.  At some point people have to have an incentive to move to where the jobs are or start business interests of some point on their own, and continually extending unemployment benefits doesn’t accomplish either.

This is one of the giant “unintended consequences” of support for housing prices and “extend and pretend” policies.  We should have forced the foreclosures through the system immediately and we still should do it now.  A homeowner who is deeply underwater cannot move to where the jobs are, as they can’t sell their house for what they have out in mortgage(s).  A renter can scoot much more easily.  We live in a nation where even in the depths of this economic mess (and all messes past, present and future) there are jobs – they just might not be where you currently live.  In addition forcing the foreclosures through the system will force prices lower, which means that the newly-mobile worker will find it easier to rent or buy a new house – where they relocate to.

While it sounds rude, after nearly two full years of unemployment payments you’re well beyond the “we’re helping you” point and into the “we’re paying you not to work” realm.  A dynamic economy requires people who will become motivated to do whatever is necessary to find employment and sustain themselves.  That “whatever is necessary” may involve pulling up the roots, and if it does, that’s what people should be have incentives to do.

The fact is that even in The Depression 75% of the people had jobs, and there were jobs to be had – in some parts of the country.  There might not be where you live now, but there are jobs – somewhere in this country, even if you don’t like the hours, job description or pay.

I know nobody wants to hear things like this, and I’m sure I will be called names for suggesting “no more extensions”, but the Federal Teat cannot be the support system for people over periods of two years or more – irrespective of how bad the economy is, in the form of cash handouts.  We can only increase GDP by actually increasing output, and that means people have to have an incentive to do whatever is necessary to accomplish that – even if it brings howls of protest, and it will.