Inflation eats into jobless benefits

A $200-a-month increase in rent is hard for millions to handle even when they're employed. It's way harder when you've lost your job, and unemployment benefits are as low as $235 in Mississippi and $275 in several more. I've been a little stumped, like many others are, by the disparity between how robust the US economy is and how poorly Americans feel about it. Inflation is a big part: True, the inflation rate is down to 3.1%, but that masks the cumulative inflation of the past few years, which is around 20% for a basket of goods and services since pre-pandemic. Rising prices have upped the stakes of being unemployed. About a third of states don't adjust jobless benefits for increases in average wages, which typically rise with inflation. My latest in Bloomberg News:

One of the areas (out of many) of inflation that I was wondering about the those who found themselves laid off. While some might get some sort of severance from their employer, a lot barely get 2 weeks' pay. Then they are met with what some call a strong market and unemployment benefits that aren't filling the gap. The gap is being created by inflation. While other areas of benefits like SSI are met with small increases due to COLA or cost of living, as measured by the Consumer Price Index, it doesn't happen in some states when it comes to unemployment. Five states have weekly payment maximums below $300, despite inflation that’s?raised?the price of an average basket of goods and services by almost 20% since 2020. A third of states don’t account for wage growth, and by extension inflation, in their payouts. Even though some states can't match what we saw with unemployment benefits during the pandemic, the increase should've been a case study on how benefits should have some similar adjustments like COLA and potentially UBI (universal basic income). Inflation is deflating the dollar - no matter which way it comes in or out. Americans are finding themselves unemployed, not having enough (if any) emergency savings, and looking for means like withdrawing from their 401K. And while the market looks strong, some find themselves exhausted from receiving benefits which means they aren't being reported on. The narrative is a mixed back. The economy has a problem, there's nothing soft about it. #economy #unemployment #personalfinance

Job postings have been declining, especially for traditional office jobs like software development, marketing, banking and finance, Gabriel Rubin and Harriet Torry report.

MARKET RECAP AND CURRENT INTEREST RATES FOR THE LAST WEEK - The FHFA house price index climbed 0.3% month-over-month in October, which was much slower than September’s 0.7% climb and October’s expected climb of 0.5%. Year-over-year, the index increased to 6.3%. - The 20-city Case-Shiller home price index inched up 0.6% month-over-month and 4.9% year-over-year, which was higher than the 3.9% annual gain the month before. - Continuing jobless claims were at 1,875,000 during the week ending 12/16, a 14,000 increase from the week before. Initial jobless claims were at 218,000 during the week ending 12/23, a higher-than-expected increase of 12,000 from the week before. - Pending home sales were unchanged in November following a 1.2% decline in October.

Jobless claims and narrative inflection US jobless claims data came out yesterday. The rise in the number of people filing the claims rose last week on both counts ie initial claims and continuing claims. Former denotes how many people got added to the unemployment pool and started using the state support apparatus while the latter denotes how many continue to be on the state support denoting a longer period unemployment. Both the numbers if they rise depict a market which is having lesser jobs to offer. In such a market incomes become stagnant as the rest even?if they have a job are reluctant to fight for wage increases. Stagnant wages and worry for future job losses have a bearing on the spending attitude and discretionary purchases major or minor go down dampening overall demand. Which in turn keeps the price rise in check. As the demand dwindles, producers pull back production, capacity utilization goes down which then results in retrenchments kicking a vicious cycle of gloom and doom. Readers would recognize that we reference the above cycle every time a data release comes out and shows an impact of job market. This is highly simplified causal analysis and childishly assumes that economy works linearly. However the truth remains that markets want a coherent story to act on a data point. Any data release howsoever complex and arcane, if its cant be reduced to what will follow is hardly of any use. Hence any release is purely seen from the prism of what the Central Bank action will be. Here in case of job losses going up, CB is supposed to cut rates to aid the ailing economy and hence yields should fall and any asset which benefits from rate cuts should rise. And remember not every data point will invite a CB action but every data point adds or deletes from the ongoing narrative. Markets value that incremental validation of that narrative so much so that by the time that eventual cut happens it becomes a fully priced in non-event. One can deduce actually all the data releases to this simplistic causal chain. Only in the edge case scenario or inflection cases this becomes slightly ambiguous. "Fed wants to cut rates to aid growth but not so much so as too stoke inflation" , at what point the low rates would stoke inflation more than they aid growth is a judgement call. As 2023 ends it will be remembered for the judgement call which the Fed took that how much high is high enough and now focus should be back on growth. The SEP released with December FOMC was overtly dovish announcing the change of heart. This sent markets into a collective tizzy and we saw the relentless ATH (all time high) rallies. What needs to be seen now that is the market pricing too aggressive. As per Fedwatch by Dec 24 the most probable range is 350-375 ie seven 25 bps cuts from current levels in 8 scheduled FOMC meetings. Dec SEP puts the median estimate at 4.6 or 3 cuts. Reality might lie somewhere in between ! #fed #jobs #fomc #powell #usd #bonds #inflation