When the Other Shoe Drops: Earnings, Market Mania, Unemployment (w/ Ed Harrison & Ash Bennington)

TL;DR

Unemployment claims data in the US remains high, indicating a struggling labor market. However, there are concerns about the accuracy of this data due to fraudulent claims and discrepancies between state and federal estimates. The current economic situation suggests a potential convergence between the real economy and the financial economy, which could lead to increased downside risk in the stock market.

Transcript

it's thursday september 17 2020 just after market close in new york this is the real vision daily briefing i'm ash bennington joined shortly by our managing editor ed harrison but first with the day's news peter cooper thanks ash for the week ending september 12th seasonally adjusted jobless claims in the u.s had dropped to 860 000 from 893 000 the... Read More

Key Insights

• 😣 Unemployment claims data suggest a struggling labor market, but concerns about accuracy and the inclusion of certain groups limit its reliability.
• 🤨 The discrepancy between state and federal estimates raises questions about the effectiveness of government programs and the overall improvement of the economy.
• 🥺 The current economic situation, with a potential convergence between the real and financial economies, may lead to increased downside risk and volatility in the stock market.
• 🛄 Fraudulent claims and the potential over-counting of jobless claims further complicate the interpretation of labor market data.
• 🥺 The Federal Reserve's monetary policies may have limited impact on the real economy and inflation, leading to increased reliance on fiscal policy.
• 🌸 The fixed income market offers limited upside for investors due to low yields, potentially exacerbating losses in the equity market.
• 🍭 The current market environment shows signs of speculation and mania, with retail investors engaging in short-dated options trading and IPO pops exceeding expectations.

Questions & Answers

Q: What is the current state of jobless claims in the US?

Seasonally adjusted jobless claims have dropped slightly, but unadjusted claims remain consistent, possibly indicating a stalled reduction in layoffs. However, there are concerns about the accuracy of these claims due to potential fraudulent filings.

Q: Are unemployment claims data providing a complete picture of the labor market?

No, there are discrepancies between state and federal estimates, casting doubt on the effectiveness of government programs and the speed of economic improvement. Additionally, undocumented workers and certain other groups are not captured in the data, further limiting its accuracy.

Q: What impact might fraudulent claims have on the labor market data?

Fraudulent claims could potentially lead to over-counting of jobless claims, making it difficult to determine the true extent of unemployment. This could impact the interpretation of the data and the assessment of the labor market's health.

Q: How might the convergence of the real economy and the financial economy affect the stock market?

The convergence could result in increased downside risk and volatility in the stock market. As the real economy struggles, it may have a negative impact on earnings and consumption, potentially leading to a correction in stock prices.

Summary & Key Takeaways

• Seasonally adjusted jobless claims in the US have dropped slightly, but unadjusted claims maintain a consistent level, suggesting a slowdown in the rate of layoffs.

• Fraudulent claims and discrepancies between state and federal estimates raise questions about the accuracy of unemployment claims data and its ability to provide a complete picture of the labor market.

• The dichotomy between the real economy and the financial economy may close significantly in September and October, leading to increased volatility and potential downside risk in the stock market.