Continued claims also show rising economic weakness. Some say it’s just California. Let’s investigate.
More signs of economic weakness are showing up in the allegedly strong jobs market.
In the week ending June 8, the advance figure for seasonally adjusted initial claims was 242,000, an increase of 13,000 from the previous week’s unrevised level of 229,000.
The 4-week moving average was 227,000, an increase of 4,750 from the previous week’s unrevised average of 222,250.
A California Anomaly?
The report shows the unadjusted level for California rose from 40,799 to 51,110. That’s an increase of 10,311.
So is this just California? Did it even happen in California.
State level data is not seasonally adjusted.
US Jobless Claims Rise, Led by California
Bloomberg reports US Jobless Claims Rise, Led by California
Initial applications for US unemployment benefits jumped to the highest level in nine months, led by a large increase in California, during a period where holidays and the end of school year can cause fluctuations in claims.
Initial claims increased by 13,000 to 242,000 in the week ended June 8, according to Labor Department data released Thursday. The figure was above all forecasts in a Bloomberg survey of economists.
New claims before adjustment for seasonal influences rose by 38,530 to 234,707 last week. Besides California, Pennsylvania and Minnesota saw sizable gains for a second week. The release noted that for the prior week ended June 1, Pennsylvania saw layoffs in transportation and manufacturing, while there were job cuts in education in Minnesota.
Two Opinions
Stephen Stanley, chief US economist at Santander US Capital Markets LLC, said in a note some of the increases in states are “implausibly large” and could be related to the end of the school year or general seasonal volatility.
“I view this more as noise than signal, and I am not going to worry for at least another couple of weeks about the possibility that layoffs are actually ramping up,” Stanley said in a note.
What Bloomberg Economics Says…
“California saw the largest gain in unadjusted initial claims (+10.3k), which makes us think part of the rise nationally could be due to weakening labor-market conditions. We estimate California’s minimum-wage hike for fast-food workers could cost the state 30k-90k jobs.” — Eliza Winger, economist
Continued Unemployment Claims
After rising from a low in June of 2022 to the ~1.82 million mark in August of 2023, continued claims have been mostly discounting a big dip then reversal in January of 2024.
Other than a count of 1.829 million in January of 2024 and 1.823 million in October of 2023, this is the highest number of continued claims since November of 2021.
Is this California School Year Noise?
That’s the claim by Stephen Stanley, chief US economist at Santander US Capital Markets LLC.
I strongly disagree.
California is weakening as expected and reported in this corner.
California Restaurants Cut Jobs as Fast-Food Wages Set to Rise
On March 26, I noted California Restaurants Cut Jobs as Fast-Food Wages Set to Rise
California is not having a good week. State Farm cancelled 72,000 policies and now fast-food chains are slashing workers.
California Fast Food Joints Slashed 10K Jobs
On June 6, ahead of this report Fox News reported Think Tank Says California Fast Food Joints Slashed 10K Jobs
The California Business and Industrial Alliance (CABIA) slammed Democratic Gov. Gavin Newsom for pushing through the law, which went into effect April 1 – and was blamed for forcing one beloved taco chain to shutter 48 locations in the state last week.
Goodbye Rubio’s Grill
The Wall Street Journal reports Rubio’s Restaurants Files for Bankruptcy With Plans to Sell Chain
Rubio’s Restaurants, operator of the Rubio’s Coastal Grill fast-casual restaurant chain, has filed for chapter 11 bankruptcy for the second time in less than four years and plans to sell the company to its current lender.
Rubio’s said it recently closed 48 underperforming locations in California, and that its remaining 86 sites in California, Arizona and Nevada will continue normal operations.
Red Lobster, the largest seafood restaurant chain in the U.S., filed for bankruptcy last month after failing to recover from dwindling traffic it suffered during the pandemic as menu prices crept higher.
BurgerFi International, owner of the Anthony’s Coal Fired Pizza & Wings and BurgerFi chains, last week said it is exploring strategic alternatives amid liquidity challenges and that it had entered into a forbearance agreement and amendment to its credit facilities with TREW.
Business Climate Casualty
Also consider Rubio’s Coastal Grill: a ‘Business Climate’ Casualty in California
California’s $20 an hour fast-food minimum wage took effect two months ago, and the casualties are mounting. Rubio’s Coastal Grill, famous for its fish tacos, closed 48 restaurants in the state on Friday.
“The closings were brought about by the rising cost of doing business in California,” the Carlsbad-based fast-casual chain explained. It added that its decision to close the four dozen “underperforming locations” in the Golden State followed a review of operations and “the current business climate.”
Gov. Gavin Newsom responded by blaming Rubio’s. Communications deputy Brandon Richards tweeted that the chain faced other problems and had filed for bankruptcy in 2020. A major culprit then was Mr. Newsom’s excessive Covid lockdowns. The flack also suggested that the minimum wage isn’t doing damage because Chipotle “just reported HUGE profits.”
But Chipotle has locations across the U.S. Chipotle execs also noted on an April earnings call that California’s wage mandate had caused it to increase menu prices 6% to 7% in the state and said it would hurt restaurant margins. They noted that Chipotle’s competitors were in worse shape to weather higher labor costs.
While California has added 35,100 leisure and hospitality jobs in the last year, aggregate hours worked by all workers in the industry have declined by 3%. The average weekly earnings for California leisure and hospitality workers has declined by 2.6% owing to a large drop in hours worked.
Congratulations to Newsom
Rubio’s went bankrupt in 2020 thanks to Newsom’s covid lockdowns.
Then in 2024, Newsom bankrupted the chain again.
What other governors can make such a claim?
Not a Teacher’s Thing
I believe we understand what’s going on in California and can dismiss the view of by Stephen Stanley, chief US economist at Santander.
I suggest he read this blog and open his horizons.
Just a California Thing?
That’s the question here. My conclusion is no. Data is weakening on so many fronts simultaneously that it’s not just California.
QCEW vs BLS Jobs
Note: The numbers in all of my charts are unadjusted. They need to be because QCEW numbers are not seasonally adjusted.
The QCEW (Quarterly Census of Employment and Wages) is a count of Unemployment Insurance (UI) administrative records submitted by 11.9 million establishments. That’s about 99 percent of the data.
Nonfarm Payrolls are are from the Establishment Survey (CES). The sample survey was 666,000 individual worksites in 2023. That’s about 5.6 percent of the data.
I discussed above QCEW chart on June 6 in How Much Does the BLS Overstate Monthly Jobs? Here’s the Answer
In retrospect, by “overstate” I should say “differ” although in this case I am confident overstate is correct.
CES vs QCEW Full Year 2023
- CES: 155,211,000 to 158,269,000 (+3.06 million)
- QCEW: 152,525,000 to 154,848,000 (+2.32 million)
I do not have confidence levels on QCEW but they should be much more accurate than CES.
For the full year, the difference between QCEW and CES is 735,000.
Payrolls Rise 272,000 Employment Drop 408,000
The data is confusing and conflicting in many ways.
For discussion, please see Another Bizarro Jobs Report – Payrolls Rise 272,000 Employment Drop 408,000
Nonfarm Payrolls vs Employment Gains Since May 2023
- Nonfarm Payrolls: 2,756,000
- Employment Level: +376,000
- Full-Time Employment: -1,163,000
In the last year, jobs are up 2.8 million while full-time employment is down 1.2 million
Similarly, there is a huge discrepancy between Gross Domestic Product (GDP) vs Gross Domestic Income (GDI)
Real GDP vs Real GDI
GDP and GDI are two measures of the same thing. Income received should match product produced.
However, income is historically low vs GDP
For discussion of the GDP-GDI discrepancy, please see More Soft Economic Data, Q1 GDP Revised Lower, Q4 GDI Significantly Lower
GDI lends credence to the idea that the household survey (employment) is correct, not the CES establishment survey (nonfarm payrolls) with its assumed birth-death adjustments.
Importantly, QCEW fits in the picture as well.
QCEW, the Household Survey employment numbers, and GDI are in sync. The outlier is the nonfarm payroll report.
On that basis, coupled with weakening trends in hard data, I repeat my unpopular opinion: A Second-Quarter Recession This Year Looks Increasingly Likely
The Fed seems confident about the short term. I suggest they should be as confident about 2024 as they are about 2025, and that translates to no confidence at all.
Today, I heard two prominent economists or analysists citing noise (one noted above).
Might I suggest the data is so noisy in so many places and in so many ways, that maybe it’s nonfarm payrolls that is the real noise.
Rubio’s Coastal Grill’s problem wasn’t an increasing minimum wage in CA, or even higher food prices. It was debt, caused by a leveraged buy-out when the chain was acquired in 2010 by the private equity firm Mill Road Capital. By 2020, the chain owed $72.3 million and it filed for bankruptcy citing an “unsustainable debt burden. It has been skating on thin ice ever since, and the bad management finally caught up with them.
Look at the bright side. This means that a bunch of folks had a job long enough to claim unemployment. Unlike “contractors” with part-time jobs that can’t file when they lose the work.
The numbers will continue to get worse every month as layoffs are significantly increasing.
The fast-food industry claims the California minimum wage law is costing jobs. Its numbers are fake:
https://www.yahoo.com/news/fast-food-industry-claims-california-181056511.html
Its just fluctuation. Don’t be too excited.
Ed Dowd appears to be the only analyst interested in this data (which directly impacts the job situation) https://t.me/EdwardDowdReal/827
Nothing another round of covid boosters won’t fix… it would kill off some of the unemployed… and kill some of the employed opening up some slots…
Win Win…
Or as Charlie Sheen says…
WINNING!!!
Its too bad that Mish and so many other wall street strategists based their entire careers (and retirement hobbies) on reading the tea leaves of government surveys that may have been useful in the past, but are now just a giant steaming pile of turd.
Don’t know if Mish is right or wrong on the specific details, but the way PPI, CPI, NFP and unemployment numbers are tallied by corrupt career bureaucrats makes the summary statistics absolute rubbish. They count the wrong stuff, they omit key portions of the economy, the category definitions were designed for a 1950s economy, and worst of all: the bureaucrats doing the collecting have openly expressed contempt for the general public. Garbage in, garbage out — no matter what analysts do or don’t do.
You can generate media interest writing click-bait on the releases, but you can’t get meaningful economic insight.
There is no point in debating the trivia of a survey that has more flaws than substance
The logical question then:
Why are you here?
Why read anything at all if it’s all wrong
I didn’t read your missive about some government bureaucracy’s number collection. The raw data is wrong, and that renders all derivative work also wrong. Garbage in, garbage out. Tried to be a little sympathetic to your plight having spent your career analyzing the data when it used to be semi ok, semi garbage.
Democrats like to tax things that work and are productive, take most of the money for politicians, and use what is left to subsidize failure.
Conservatives like to take out our frustrations on things that are annoying, and do everything we can to help our friends and family.
I wrote EXACTLY the same comment here under initial employment, and the previous post under PPI.
When Mish cried, the comment got downvoted.to -2
When Mish didn’t cry, it got upvoted to +5
Making Mish cry apparently gets a commenter -7 votes even for the same comment.
A blog setup where merit not only doesn’t matter, but gets punished, is why third world countries fail – and why the US is failing.
Nicholas Eberstadt, Men Without Work (and women now too)
At least 10 million Working Age people simply have left the work force as the job distribution in the US has decimated jobs that can provide for creating a family and household
The US economy is not strong.
The Massive GovSpend that makes it look strong to non-discriminating economists almost all has a negative multiplier
Yesterday the Fed raised the neutral rate to 2.8%
Nope. Potential output is going DOWN not up in the intermediate to long term.
All that AI and “energy transition” (which is just a form of mass murder ultimately as people will have to choose between heat and food) is not going to raise output.
AI is definitely useful in countries that retained manufacturing as it enhances the manufacturing processes.
In the US hamburger flipping economy, it will make the hamburger flipper redundant.
Mums are down. Pops are up, a rare commodities, especially in CA. Happy fathers day.
You too Michael. I’m flying to the big apple next week to spend some of that roach motel money.
Great fathers are rare commodities. U are one of them. Enjoy NYC with your family.
GDP NOW is at 3.1% growth. Mish is at Recession. Someone is going to be dead wrong.
Mish’s methodology makes more sense so I’m siding with Mish.
The social security snapshot is out. For May we have 157k brand spanking new socialists collecting free money. Sadly, 47k passed away bringing the net total socialists to 124k for the month of May. There are currently 72.352m socialists taking money from hard working people.
The new updated monthly cost for all this free money is now $120.655b / month.
https://www.ssa.gov/policy/docs/quickfacts/stat_snapshot/index.html
So those who paid ss taxes are now socialist .. you are annoying as fuck
paying the tax makes you a taxpayer. signing up for social security makes you a socialist, it’s voluntary, no one forces you to do it.
Give me 6.2% of your gross earnings. I’ll voluntarily give it back to you in 50 years 😉
You can’t opt out of paying the SSI tax and, as a result, not receive benefits. Only selected groups are legally allowed to do this. The Amish are one group that do not pay SSI taxes and also do not receive any SSI benefits. The same applies to county workers in Galveston, TX. Federal employees under the old Federal retirement system were also not taxed for SSI and were not eligible for SSI benefits. This implies that paying the tax = a reasonable expectation for receipt of benefits.
Receiving more benefits than one pays in is a whole other ball game.
“You can’t opt out of paying the SSI tax and, as a result, not receive benefits.
I can’t opt out of income taxes, property taxes, sales taxes, and almost all other government fees and taxes either.
True, but neither can any other individual or group unless they don’t earn any income. Regardless of whether one pays income tax or not, they still get the benefits of being a citizen (i.e. food stamps, defense, etc). Social security requires one to work a certain number of “credits” to recieve benefits (and pay SSI tax while doing so). This is not Socialism. Receiving more benefits than you paid in, or dying before you receive any benefits…..that’s Socialism.
It’s not free money. I paid in and now I’m going to collect
what you paid in is pennies, what you take out is dollars with generous COLA that you didn’t pay for.
What you are implying here is something I do agree with (i.e. receiving more than one paid in assuming a reasonable interest rate = Socialism).
Many do receive more than they paid in. This is Socialism. Many die before receiving any benefits and thier estates get bascially nothing despite years or decades of contributions paid in….this too is Socialism. The world is an imperfect place. People on both sides of the political isle bitch and moan about all sorts of dumb shit (including this topic). Bottom line is that everyone has thier hands in the cookie jar in some way shape or form. As long as it’s available you’d be a fool to not take it.
When you use the road and the airport to enable your flight to New York this weekend – you are a Socialist. Quit stealing.
The size of the labor force rises over time. Looking at the absolute number is not so meaningful
https://fred.stlouisfed.org/graph/fredgraph.png?g=1oXZQ
Not necessarily, the population rises over time (including immigration) but the labor force participation declined last month.
https://fred.stlouisfed.org/series/CIVPART/
Only by a tad bit, not out of its range.
Depends on your time frame. From 2000 to 2024 (a quarter century) it’s been dropping by a lot.
This isn’t quite the right thread to ask but … where are the Bond Market vigilantes?
I know this uptick in unemployment results in money-demand (measured by interest rates) coming down but with almost $1T borrowing per quarter, that should push rates up.
Me thinks the vigilantes were run out of town by Fed buying (brilliant Fed, now sitting on $500B+ of losses of taxpayer money on their bond purchases).
The Fed still has too many long term government bonds and mortgage backs. They chickened out in the late teens.
JPow calls-out jobs numbers yesterday…
…IUC numbers jump today.
The reports this spring show a weakening economy, but they also show the persistence of inflation. The Fed is in a tight spot, because if inflation isn’t beaten back down to that 2% target, we will have ’70s style stagflation with the danger of hyperinflation. I’m afraid that the only cure will be a recession, which will be shallow but necessary to avoid a repeat of what Volcker had to do.
Much more danger in easing too soon than keeping things as they are.
That number bounces around, but the upward trend is clear. I think we will see another rise in the national UE rate in June.
Junk food restaurants going bk is good for health. The more they close the better it’s for us. It isn’t a black swan
I think California is already in recession. Much of the nation will soon follow. While some of this is the California state government’s fault for sure, I think rising rates are finally percolating through businesses.
Regarding Rubio’s, I go there for lunch sometimes. They have too many locations (3) around my geographical area (in a 5 mile radius) and so not surprised some have to close. I don’t think ever restructured after covid despite declaring bankruptcy and tried to keep too many locations open. I think commercial real estate is also playing a part in all these restaurant closings in general.
Something new I am seeing in the corporate world is an accelerated shift of work to overseas locations. I think we may be at a crossover point where global growth outpaces US growth. We may for the first time have a US recession without a global recession. That is something that has never happen post WW2 but something I had been looking for after China and India entered the global labor force in the 2000s in a big way. I think it possible the US and Europe will go into recession while BRICs economies flourish.
California is just the first visible Black Swan we can see …. the Flock is not too far behind ….
California is at the leading edge because of the impact of their high minimum wage, but a bunch of other states have raised their minimums too, some to rates nearly as high. This will be felt throughout retailing, and not just there.
The gov is against big businesses that destroy small businesses, but is for an increase of the min wages. Higher min wages destroy small businesses. Chipotle and Starbucks were paying higher wages before the raise. They are more immune from Gavin Newsom radicalism. Higher CRE vacancies more room for drug dealers and the homeless people.
It’s hard to quantify my intense hatred and distaste for California, let them rot like Sodom and Gomorrah.
That being said, I ground it out there for 2 decades, I was a homeowner, the place is filled with communist Nazis. They think they are so great, and California is so great but they are so blinded by their rose colored glasses they can’t see the immense piles of manure they mistake for mountains. They don’t even know how little freedom they have, but hey there’s palm trees!
We ran and ran hard for the South, and it was the best decision we ever made. The economy and personal freedoms are second to none. We even get little perks like plastic bags at the grocery store, cheaper gas, and low taxes.