Moneybeat - A mixed bag of unemployment data

JENNY ROUGH, HOST: Coming up next on The World and Everything in It: The Monday Moneybeat!

MARY REICHARD, HOST: New claims for unemployment benefits rose for the first time in nearly four months. Week over week, the number ticked up from 1.3 million to 1.4 million. And that ends a steady decline from a peak level of nearly 7 million in late March.

ROUGH: Continuing unemployment claims—that is, those remaining on jobless benefits—have continued falling, though. That peak was 25 million people the first full week of May. That number has dropped dramatically to just over 16 million.

REICHARD: So where do we stand on the jobs recovery as the economy slowly opens back up? Here to talk about that and more is financial analyst and advisor David Bahnsen.

Good morning, David.

DAVID BAHNSEN, GUEST: Well, good morning. Good to be with you.

REICHARD: I know from hearing you week after week, you really are looking for the new claims number to drop below 1 million—and even then, that’s way too high—but now that the number is climbing again, how concerned are you?

BAHNSEN: Well, it is a mixed bag and you alluded to both of the data points that make it so. There’s no question that the claims on an initial basis moving higher by roughly a hundred thousand has to be considered a concern. And I would say a pretty big one, but I’m going to tell you in a second, why I think it happened. But then on the other side of it to ignore the fact that continuing claims not just dropped about a million, but dropped significantly more than had been anticipated. There’s a couple of nuances that make this more complicated, but just to kind of use a round figure explanation of what happened: you had about 1 million 300,000 or 400,000 people that had lost their jobs in the last week or so. And you had about a million, 300,000 people, or so who found a new job or got their old job back. And so the total number is offsetting in that way. But the reality is that you have to question why four months after the initial lockdown, we’re still having on a weekly basis, a million plus people that are filing unemployment.

I think that there are hundreds of thousands in that count that are old lay offs that are just now getting around to filing. And another hundreds of thousands that are delayed claim processing from various states. And I believe that what we’re dealing with now is not the initial shock and awe, the shutdowns of March, April, but folks who maybe had been hired back or people who were just kind of furloughed and we’re hoping to be back in it. It continues to be the very lowest income segments of the economy that are struggling from it, which both is a larger source of sadness on the social and cultural implications, but then less of a source of distress to the overall economy. It’s one of the big reasons why housing is still continuing to surge new applications, new purchases, new activity, homebuilder confidence, all of those things in the wake of unemployment. Because at this point, the unemployment has been very constrained within lower income segments.

REICHARD: So a mixed bag on jobless claims. I’m curious where you think things stand on Capitol Hill about another round of economic relief or stimulus because for many people, depending on where they live, the $600 unemployment bonus ended on Friday and for more people, the benefit expires at the end of July. What’s your read on the politics of that?

BAHNSEN: Right? So I think it’d be helpful for, for listeners to clarify that nothing was ever done and nothing is being done that changes the state unemployment funds, which is largely where unemployment insurance has always come from. This $600 a week has sort of been a bonus. So there is a huge political pressure to address this in the next round of stimulus. And I think politically I can pretty much tell you, there’s almost no chance that they’re not going to end up doing something about it. Secretary Mnuchin showed his cards this week, they plan to basically reduce it to $400 a week and then go down from there. I’m still hoping the final bill will limit that to people that can show what their wages were beforehand. I don’t think they should be paying people more than they made and not because I’m trying to be stingy or because I’m trying to drive a certain, you know, principal necessarily, although I’m always a big fan of doing that, but that’s not really my point here. My point here is economically it’s disincentivizing for people to go back to work if they can make more money to not work. And so I think that is corrosive to their soul and I think it is completely damaging to the employment dynamics of our economy. They’re going to get something done.

But as I’ve been saying to clients, and I hope everyone understands, a final bill’s gonna end up coming, and a final bill is going to be something that makes everybody happy and everybody unhappy.

REICHARD: Accountability should matter here. What’s the big story of the market this week?

BAHNSEN: In the stock market? The stock market story for about a month now has been an unbelievable persistence. As the media has driven home a dynamic of a much less fatal and a much less severe increase of coronavirus. And I think it’s an absolutely stunning and very encouraging resilience in capital markets that as the hype and the panic around what’s really been a very, you know, concerning growth in cases, but nevertheless, clearly cases that are not leading to the same level of hospitalizations, of ICUs, of intubations of ventilator use, and then ultimately a mortality that the market has not been as concerned about that. 

The second story going on in the market is that the market is holding in there, doing okay. And yet you do see those big tech companies that have been driving so much of the stock market’s performance, kind of turning the other way. And so I believe we’re in early innings of what will be a paradigm shifting moment for the us stock market, where the big tech names four or five, six names that have led the market for quite some time, not just through COVID, but really for several years, we’ll end up getting repriced to revalue, do a more reasonable level, and yet other parts of the market will still get their due. So we’re, we’re living in interesting times. 

REICHARD: David Bahnsen, financial analyst and advisor. Thank you for your insights again this week.

BAHNSEN: Thanks for having me.

(AP Photo/Mark Lennihan) The New York Stock Exchange is shown, Tuesday, July 21, 2020. 

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