August 20, 2010
- A d v e r t i s e m e n t
Goldman’s Andrew Tilton has nothing good for the factless pumpers of the recoveryless recovery: “The timing of the rise in new claims fits with the surge in extended benefit recipients (although as already noted the auto distortion probably had its largest downward impact on claims in that same week). This raises the question of whether some of the people who lost benefits due to funding problems reapplied via new claims, when in fact they simply should have gone back on the benefit rolls without the need to file a new claim. It is difficult to know for sure whether this has happened. Our Labor Department contact thought this also would be minor. In our view, the fact that claims have continued to rise in the first two weeks of August, even though total benefit recipients were already back at spring levels by late July, casts further doubt on this re-filing hypothesis as a major factor, as most eligible recipients should have re-filed by now. Certainly, any further increases in new claims – or simply a persistence of these high levels – would suggest that the labor market has in fact deteriorated further. In short, we need to see a fairly quick reversal of the recent increase in initial claims to sign onto the view that distortions were principally responsible for this apparent deterioration in US labor market conditions.” In other words, those who are trying to misattribute the surge in initial claims, and cast the economy in a rosier light, can only do so by blaming government error and inefficiency in reassigning existing claimants to initial status. This is a scary possibility, as it means that those on the verge of exhuasting their 99 weeks of maximum benefits may have found an unexpected loophole to make the length of the “welfare state” support up to 198 weeks (or double the existing max). While it goes without saying that the economy is double dipping, the fact that those who would at least have been forced to look for a job at the end of 99 weeks of welfare subsistence may have doubled their benefits’ duration should raise major red flags. However, that this occurred as a function of governmental incompetence is no reason for surprise whatsoever.