Opening Statement from the June 2020 Dividend Gems
Originally published on June 14, 2020
U.S. Employment Data: On April 12 (April 2020 Intelligent Investor) we released a formal estimate of 35 million (minimum) and 50 million (worst-case) job losses due to the COVID-19 hysteria. As of the most recent initial jobless claims data (week ending June 6) the U.S. has lost another 1.54 million jobs (versus 1.9 million the previous week) for a total of 44.2 million jobs lost over the past eleven weeks.
In only two months, the U.S. unemployment rate (U-3) which had been the lowest in more than 40 years soared to the highest rate on record at 14.7%. In April, the U.S. recorded its largest one month increase in the unemployment rate in history (from 4.4% to 14.7%) as well as the highest rate since 1948 when the U.S. government began keeping official records of economic data.
The gradual reopening of the economy has resulted in some improvement in employment data. For instance, although unemployment (U-3) reached a new high at 17.1% (weekly data) it has since declined to 14.5%. Meanwhile, continuing claims (those who have been collecting unemployment benefits for more than two weeks) declined to 21 million after reaching a recent peak of 25 million.
Previously we discussed that millions of Americans were not likely to have been included in the unemployment data from March and April. We now know that 8.1 million American workers were not included in the April unemployment data due to misclassification. After adjusting for this correction, the real unemployment rate (U-3) from April was 19.5%.
So long as officials continue to make progress reopening the economy, the labor market will begin to show signs of improvement. But we believe a large percentage of lost jobs (12 to 15 million) will never return. This brings us to a more accurate gauge of unemployment known as the U-6 unemployment rate. The U-6 rate soared to 22.8% in April (unadjusted for corrected data as discussed above).
Washington has created a huge incentive for many Americans not to seek employment. Part of the problem with what is expected to become a persistently high unemployment rate is being exacerbated by the overly generous benefits that have been provided to unemployed workers through the CARES Act. In addition to their unemployment insurance, each worker who lost his or her job is also receiving $600 per week. Thus, a large percentage of U.S. workers (up to 20%) who lost their job since March are receiving twice as much from total unemployment compensation as they earned working full time. Even worse, under the CARES Act there is no requirement for unemployed workers to actively seek employment. Hence, the overly generous assistance being provided to many of the nation’s unemployed population presents a major problem that must be addressed sooner rather than later.
This article continues.
To continue viewing this entry please sign in to your Client or Member account.
Restrictions Against Reproduction: No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without the prior written permission of the copyright owner and the Publisher.
These articles and commentaries cannot be reposted or used in any publications for which there is any revenue generated directly or indirectly. These articles cannot be used to enhance the viewer appeal of any website, including any ad revenue on the website, other than those sites for which specific written permission has been granted. Any such violations are unlawful and violators will be prosecuted in accordance with these laws.
Article 19 of the United Nations' Universal Declaration of Human Rights: Everyone has the right to freedom of opinion and expression; this right includes freedom to hold opinions without interference and to seek, receive and impart information and ideas through any media and regardless of frontiers.
This publication (written, audio and video) represents the commentary and/or criticisms from Mike Stathis or other individuals affiliated with Mike Stathis or AVA Investment Analytics (referred to hereafter as the “author”). Therefore, the commentary and/or criticisms only serve as an opinion and therefore should not be taken to be factual representations, regardless of what might be stated in these commentaries/criticisms. There is always a possibility that the author has made one or more unintentional errors, misspoke, misinterpreted information, and/or excluded information which might have altered the commentary and/or criticisms. Hence, you are advised to conduct your own independent investigations so that you can form your own conclusions. We encourage the public to contact us if we have made any errors in statements or assumptions. We also encourage the public to contact us if we have left out relevant information which might alter our conclusions. We cannot promise a response, but we will consider all valid information.