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Jobs And Jolts - The Economy Is Already Recovering

Jun. 13, 2020 8:30 AM ET2 Comments
Tim Worstall profile picture
Tim Worstall


  • Initial unemployment claims have fallen again - we really are seeing this mass rush into unemployment falling.
  • The unemployment rate fell again as the exit out of unemployment was higher than the entry into it.
  • The JOLTS report gives us an idea of why - open jobs offers remains well higher than it was in the depths of 2008/9.

How long oh Lord, how long?

Not that we're doing spirituals here but that is the question we want the answer to - how long? We know we're in the most terrible collapse in economic activity and what we want to know is how long is it going to last?

We have two major reasons for being interested as investors. The first is that a stutter in the economy doesn't make much difference to stock values. The value of a stock is the net present value of all future income from it and that doesn't change much if the current quarter isn't looking so good. A permanent resetting of the economy to some lower growth - and thus, presumably, profit - rate makes a huge difference.

A V shaped recession doesn't change stock values that much therefore.

The second is something that economists worry about. The longer any recession goes on then the greater the risk of permanent damage to the productive capacity of the economy. So, again, a short recession is good for us and stock values, a long one bad.

Unemployment claims

How many people are getting fired - people voluntarily leaving usually don't gain unemployment insurance - is obviously an indicator of how bad things are out there. We had a vast rise in this number and it's been falling these past few weeks:

In the week ending June 6, the advance figure for seasonally adjusted initial claims was 1,542,000, a decrease of 355,000 from the previous week's revised level.

Sure, that number's still much higher than the couple of hundred thousand a week we were getting pre-covid but that in itself was unusually low. Actually, when we look at it as a rate - so, a percentage of all workers, rather than the number itself - it was about half the rate of the late

This article was written by

Tim Worstall profile picture
Tim Worstall is a wholesaler of rare earth metals and one of the global experts in the metal scandium. He is also a Fellow at the Adam Smith Inst in London and an writer for a number of media outlets, including The Times (London), Telegraph, The Register and even, very occasionally indeed, for the WSJ. This account is linked with that of Mohamad Machine-Chian: https://seekingalpha.com/user/52914142/comments

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 (2)

Moon Kil Woong profile picture
The quality of jobs and the salaries are uninspiring. What matters most is will total salaries be above what it was pre crisis (no), and will the average salary per worker be above pre-crisis (also no). And I think we all know this. No one is fooling anyone. The market is up because companies trading in the market hopefully can cannibalize small and medium sized business for growth and is why the powers that be did all they could to divert the money going to SMEs.
No one disputes that the economy will begin to recover as lock-down restrictions are eased. The $64,000 question is what type of recovery will we have. How will consumers react, how many small and medium sized businesses will never re-open because the financial strain was too much and how many of the temporary job losses will turn out to be permanent? Even the Fed acknowledges the path to recovery will be long and hard.
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