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May Jobs: Curb Your Enthusiasm

Jun. 07, 2020 9:05 PM ETHTZ, MRNA82 Comments


  • The May jobs report is both better and worse than it looks on the surface, but mostly worse.
  • Though the data may be unreliable right now, the report showed a small recovery, with 1 out of 7 lost jobs returning. This is not yet V-shaped; curb your enthusiasm.
  • One important indicator got better, but several others got worse. State and local government layoffs may become a wet blanket for recovery.
  • Nominally, the largest losses had been in restaurants, which saw 26% of lost jobs returning. That other 74% is the biggest single chunk of unemployed remaining.
  • Other services that rely on density and volume to make up for high fixed costs will also have trouble coming back.

CNBC, But Dumber Than Usual

You keep using that word, I do not think it means what you think it means.

This is an old trick of using changes instead of levels to make a recovery look better. Here’s the chart they should have shown:

Yes, a small bounce that brings us back to 2012 levels of employment. Nothing to be sad about, but still very, very bad.

Another way of looking at it is comparing the relative job losses with the last recession, until now the greatest economic calamity in my lifetime.

BLS. “NSA” = not seasonally adjusted

Or maybe you prefer the unemployment rate as a measurement?


Curb your enthusiasm.

Thought experiment:

  • You have $100, but lose 80% in the market. You now have $20.
  • But then your portfolio goes up 80%. Do you have $100 again? No, you only have $36. You have still lost $64.

This is simple arithmetic, something everyone seems incapable of right this moment.

One out of seven jobs returned in May, which is another way of saying six out of seven did not.

On top of that, our data is unusually terrible right now. Either BLS is really struggling with the circumstances, as they claim, or there is something worse going on, because the errors are all on the side of undercounting unemployment.

The Pandemic Unemployment Assistance (PUA) is being counted separately, at the bottom of the unemployment insurance (UI) tables. The current number is 11 million people receiving PUA and other non-UI benefits for the week ending May 16, the same week as the jobs report surveys were done. These overlap to some degree with regular UI claims, but to some degree, that 10 million is additive. We just don’t know.


Complicating matters, the household survey, from where the headline

This article was written by

Confirmation Bias Is Your Enemy.

Tech and macro. Deep analysis of long term sectoral trends, and the opportunities arising from them. I promise not to bore you. Author of Long View Capital, a Marketplace service for long-term investors. Risk Factors: I am also wrong sometimes.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (81)

In the commercial real estate world, here is what is going on : 
Too many office and retail tenants have moved out, stopped paying full rent and/or are trying to give back space and negotiate lower rents.
Landlords experiencing major liquidity crises. Collateralized letters of credit are being or have been drawn down and new equity is required to fund operating expenses and debt service.

Lenders are tightening the real estate lending criteria and the appraisals for new mortgages or refinancing are coming in significantly lower post-Covid.
Even if the Fed buys the loans from the lenders- the Fed has not “forgiven” the loans. Huge crisis slowly unfolding which will leave more “permanent” office and retail vacancies- as shift continues to “work from home” and online shopping.
Ta0 profile picture
@Emptynester fka mom1
I'm thinking this same situation is happening in the housing market as well.
Within a year, real estate of all types will be much cheaper to pick up. It's not so much another black swan, just one more dark buzzard to join the rest of the wake.
Trading Places Research profile picture
@Emptynester fka mom1 Interesting. I expected a lot of this was happening but have no numbers on it. The corporate macro tables are months behind consumer stuff. Thanks for the color.
The real estate market (all types- multi-family, office, retail, hospitality, industrial, self-storage, etc) is approx. $17T in value in the US.
Downtown, urban areas are and will continue to be hard hit. In addition to layoffs, if people continue to work from home, even some of the time, companies need a lot less space in downtown central business districts than they did pre-covid.
Furthermore, many will avoid, and will continue to avoid going to the mall, enclosed office buildings or any buildings with shared air conditioning systems that blow/recirculate shared air as long as the covid-19 threat remains.
As a result, people are less excited to live in expensive, urban apartments if the office, restaurants and bars are not safe to go to. Trend of urban living is already shifting back to suburbs.
This will take time, as in years, to implode. Borrowers, after months of not paying lenders will have no other choice than to give keys back to lenders. Then lenders will have to own/manage properties for a period of time before finally selling the real estate, at a loss, back into the market. Borrowers and lenders will both lose money. 
Even if this happens to a small, but meaningful percentage of real estate, it will affect rental rates and values for years.
It is quite refreshing to see someone call this mess for what it is. I don't know how anyone jumps in right now with "an environment that totally eschews math and logic"! Well said!
"The definition of logic is a person going down the wrong road with confidence." - unknown @neocolonialist
Curiosity Killed The Cat profile picture
@Trading Places Research

This is the best (un)employment analysis I have ever read on SA. What the spin doctors did with Friday's BLA release boggled my mind so much, I felt like I was with Grace Slick down the rabbit hole. www.youtube.com/...

Go ask Alice, I think she'll know
When logic and proportion have fallen sloppy dead
And the White Knight is talking backwards
And the Red Queen's off with her head
Remember what the Dormouse said
Feed your head, feed your head
Trading Places Research profile picture
@Curiosity Killed The Cat Thanks. Someone else posted Weird Al lyrics in the comments, so I think we are capturing the zeitgeist, at a bare minimum.
The market is screaming higher today.
Trading Places Research profile picture
A symptom of a country that can no longer look a big challenge squarely in the eye. Good luck, so long.
TPR, thanks for the expert analysis of 'how to lie with statistics'.

SA: lies and dog whistles threaten your hard earned capital. Stay safely in the real world. Keep in mind that the COVID19 pandemic is the sole cause of the global recession. COVID19 begs for a coordinated global response. Multiple vaccines are the necessary endgame, if possible, whatever it takes.

Listen to experts like TPR who are assembling the '2020 storyboard' for informed investors.

I am up over 10 percent for the year, and am still seeing growth in some businesses. I worry about 'negative interest rates' very much after a 30 year projection of stagflation.

My MCMC models show much deeper downsides after 2019 and COVID19 stock leaps. There is some upside.

The toughest choice is between stocks and index funds. Heck, some of both has been successful.
@Trading Places Research, many of the best SA authors, Lyn Alder, Heisenberg and Calafia Beach are not offering actions. Illumination instead. To your HTZ observation add AMC who have indicated struggles reflected in bond yields but not equities. If you're mad, the dull thud you're hearing on the cell wall is me next door.
Trading Places Research profile picture
@Tom Vacher Not mad. Just sad that I live in a country that can no longer meet a large challenge head on.
@Tom Vacher - I have a feeling the dead cat bounce in Hertz stock is due to massive short covering. pretty typical in companies that declare bankruptcy (which can be a long process). Many shorts don't want to keep their capital/profits tied up to get that last 10% profit and just cover the short ahead of time
Thanks for the explanation @clrodrick .
Ralf Anders profile picture
Although it is probable that the stock market will crash once again, instead it could be the dollar the devaluation of which would lead to a rebalancing of things.

Weak Dollar => Rising Stocks
Stable Dollar => Falling Stocks

... I just wonder, how all of this strange situation develops this year and beyond.
We will find out in 6 weeks time @Ralf Anders .
Value Digger profile picture
According to a recent survey by the Conference Board below, many human resource executives at large companies say their organizations plan on laying off workers in the coming months as they see the impact of the crisis on their business:


In other words, layoffs are far from over.
Thanks for the link @Value Digger .
Trading Places Research profile picture
@Value Digger Conversation I had on Saturday with a friend, who owns an import business.

Him: When is the data going to start showing what’s happening?

Me: What?

Him: There’s no recovery. It’s total shit out there.

Me: Oh. It’s not the data that’s lying, its the headlines you’re reading.

Him: That makes more sense.
Value Digger profile picture
Unlike many complacent and grossly incompetent fund managers, there is a reason why Warren Buffett is staying on the sidelines.

Specifically, unemployment rate is at a historically high 13.3% today versus 3.5% in Q4 2019.

However, SPY is today where it was in Q4 2019.

In other words, the big disconnect between valuations and fundamentals in Q4 2019 has become tremendous in Q2 2020...
The gap has grown.
hottttdog profile picture
Another mistake in the reported BLS jobs unemployment data? In any case, the effect of this underreporting of the unemployment rate was certainly significant! After the BLS reported "unexpected low unemployment numbers" the market Friday hit record highs. And the low BLS unemployment numbers are likely to also influence the Federal Reserve meeting this Wednesday, when it considers the proposed extension of the $600/week unemployment supplements that are scheduled to expire at the end of next month. Curious timing? It will be interesting to see how the market reacts tomorrow to disclosure of the latest BLS unemployment numbers "mistake".
Trading Places Research profile picture
@hottttdog The Fed is too smart to back off now, but Congress and the President is a different story.
> The purpose of these articles going forward will not be to provide actionable analysis

That is fine by me. I am looking to better understand the current macro so that I can make better decisions regarding my portfolio micro. What you are doing is very helpful.
It sounds like a deal to me @CarefulClimber .
Trading Places Research profile picture
@CarefulClimber Good luck. The Strange is everywhere.
08 Jun. 2020
Very good analysis - and you can tell your editor that there's an obvious action to take....
What action @PMNI ?
Diesel profile picture
It's alarming that we have been reopening for several weeks now, yet less than 20% of the lost jobs came back so far, indicating that many if not most of those jobs might never be back.
It doesn't matter because the unemployed are making unemployment benefits of $600 + per week @Diesel .
Diesel profile picture
It matters for the engineers that just got laid off from Boeing. They were making more than $150k per year.

Also the $600 money expires in July.
Trading Places Research profile picture
@Diesel I didn’t mention it, but there are C19 hotspots flaring up as well from all that reopening, largely in the SW and SE. CA, TX and FL are the biggest states going up, but there’s a host of others. AZ is the worst right now.

Yet the discount the market is placing on a second wave is zero.
Thanks for your data driven analysis. Anybody's guess when the next shoe will drop
After I get through partying @Upintheair1835 .
This is one of, if not the best analysis I have seen in a while. Really appreciate the effort and you are not the one that is crazy. Robintrack tells us everything we need to know about the current rise in equities.

It is not an accident that this employment number showed up in a Trump 2020 ad within 24 hours of it being released. It is also not an accident that the numbers are always in the benefit of the current administration.

Know the players and you know the game.
Ta0 profile picture
Employment numbers only go up to May 23 (I think). It's missing the last half of May.
Trading Places Research profile picture
@Ta0 Surveys are done on the week that includes the 12th, so in May that’s 10-16. Surveys for June are being done this week
Ta0 profile picture
@Trading Places Research
Do you think this next survey will make the market jump higher?
Ta0 profile picture
Everything you know is wrong
Black is white, up is down and short is long
And everything you thought was just so important doesn't matter
Everything you know is wrong
Just forget the words and sing along
All you need to understand is
Everything you know is wrong
Trading Places Research profile picture
@Ta0 Weird Al is a national treasure and I will fight anyone who says differently.
George Spritzer, CFA profile picture
What do you call a stock that is down 80%?

Answer: A stock that dropped 90%, then rallied 100%.
This article is the best I have read in years. Well done. You are not the crazy one. No matter how many people tell you over and over again that up is down, or a tree is an elephant, its still not true. Once reality sets in, this is going to be a crash historic in depth and longevity.
I will not curb my enthusiasm. I partied all weekend drinking Coronabeer. Don't be a party pooper.
The longer this goes on the worse it is gong to be.
Trading Places Research profile picture
My humblest apologies to everyone, I just realized I made a transcribing error on the charts.


Edits should be live soon. Sorry.
Trading Places Research profile picture
To be clear, the nominal numbers are correct, just that percentage was transcribed wrong.
Ok Negative Nancy, people are sick of drinking the koala I’d and going back to work!
Who is Nancy and why would you drink a koala? Try a cola and rum instead.
Celebrate the numbers @Jcholder .
Suppose the pre-covid record level market valuation was reasonable, which it was far from by any meaningful valuation metric. 

Now after 40 million unemployment claims, depression era like unemployment rate, 20%+ (annualized) GDP decline in first half of 2020, the market is near that level, and NASDAQ and Apple at new record highs. Just getting back to pre-covid earnings level, it will take at least until 2022.

And yet Powell and Trump cronies on Wall Street and CNBC and WH are not only justifying the outrageous current valuation, but declaring new highs. Such cheating and madness will continue until the unholy alliance of Wall St, Fed and Govt (Congress and Exec) is vanquished.
He wants to get reelected @Mochaudhury .
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