The Wile E. Powell Inflation: Are We Really Just Going To Ignore The Cliff?

The Department of Labor would later tally up the scale of this unemployment “cliff”: once funding dried up, 5.33 million eventually rolled off either of Pandemic Unemployment Assistance (PUA) or Pandemic Emergency Unemployment Claims (PUAC) in a bitter and painful twist to a fading recovery.

Obviously, we will never know what might have happened had the government believed in last year’s hype and restrained itself. Elections and all that, as well as vaccines, too. Still, maybe more thought should have been given to why the first helicopter hadn’t created a recovery in the first place, leaving so many millions exposed to the negative whims of political employment policies.

There is a chance, maybe a very good one, we find out this year. As 2021 draws closer to its final month, the good news is there won’t be any unemployment cliff this December. The bad news, this is only because there was an even bigger one in September.

The prior one, December 2020, took down more than 5 million pandemic claims temporarily. The latest one, likely the last one, took down more than 8 million pandemic claims permanently.

Eight million government payment streams vanish in a flash, or its economic equivalent of a condensed period spanning only 5 weeks. This really won’t be something to consider?

No! Of course not. LABOR SHORTAGE!!!!!

Setting aside the lack of market clearing emotions surrounding the topic, even if there was a tight labor market the numbers just don’t add up close to eight million more.

The Household Survey, the larger survey encompassing household workers, especially more informal gig workers, gained only 2.9 million.

Remember what did not happen in September. As these eight million lost their government payments throughout that month, they did not flood the jobs market. On the contrary, the labor force itself lost several hundred thousand more (on top of the hundred thousand or so who didn’t enter it). And worse than August, employment growth during September was decidedly minimal.

In fact, you could see the recent trouble coming…just by using unemployment claims data. The uptick in existing as well as new claims began around late July, just in time to sour the Fed’s tying taper to projected continuous payrolls.

If it was, then as the economy shakes off its impacts (see: today’s ISM Non-manufacturing record high) it is still faced with the unemployment cliff in 2021 which, unlike the one in 2020, is final. There’s no restored funding coming, no Helicopter #4 on the horizon.

And if Q3’s slowdown isn’t only attributable to the pandemic, as the bond market clearly sees it, the huge loss of pandemic claims only subtracts that much more from the fading “stimulus” regime already having given up most of its effects months ago.