Unemployment is Much Worse Than it Looks

I noticed at CNBC today they emphasized the fact that some 4 million+ new jobs were created. While relegating the fact that 1.47 million new unemployed filed claims this week and surpassed the 1.3 million expected.

Here is the thing, that 4+ million new jobs in June was for a full month, while the 1.47 million new unemployment claims was for a week, which if you recal there are 4.3 weeks in a month. One look tells you that there were no NEW actual jobs created, but that 4+ million people went back to jobs that were only temporarily on hiatus for Covid closures and were just returning to work. But that was for the entire month of June even as we saw well more than six million plus people filing new unemployment claims in June so NET there were actually fewer people with jobs at the end of June than at the start, and that is really bad news for several reasons. And it is also before the second wave started to break a couple weeks ago and is not really getting going.

The coronavirus may have mutated to become more infectious, Dr. Anthony Fauci says

We all wanted this to just go away but we also all speculated on what would happen if it mutated and became more infectious than it already is. It is also proving to be deadlier with the death rate now at about 5%. It is also affecting younger people that thought they were immune.

What all this amounts to is far stricter shut downs and quarantines, ever more restrictions. First wave = economic catastrophe, second wave = economic death.

I don’t know about you all but I did not go out and hoard the first time around like so many others, as a result when I did go shopping I was faced with shortages of almost everything, I went more than 2 months without seeing an egg for sale, and I still to this day have not seen hand sanitizers. You do occassionally see toilet paper but it small packages and very freaking expensive. It is pure luck when you do see it, so tomorrow I am going out shopping and buing everything I can load in my car. Dry goods mainly because of Florida power outages in summer. Also small propane camping fuel. I have to be able to boil water or I will not have coffee, and that would be more than I could handle, for one thing I would die of constipation without coffee I believe.

And the real bottom line is that millions that SHOULD have been counted as unemployed never were. Their applications were rejected at state level and the overloaded phone and computer systems made filing a practical impossibility. Many gave up.

I look at one of my favorite restaurants Bone Fish Grill, they reopened May 1 so I had my birthday dinner there. They had removed more than half the tables, booths were blocked off ever other closed. No bar seating at all. Seating strictly by reservation. The servers wore masks and gloves and they expected you to just know all their contacless rigamarole, they stayed as far away as possible and I felt pretty much ignored the whole time, having to battle to get attention. Even though I was one of three tables in the place with customers. And there were employees everywhere looking busy wiping things, the smell of disinfectant made a sharp counterpoint to the basil infused olive oil dipping plate for the warm ciabatta. I could almost detect a hint of goat cheese and calamata olive if it were not for the spray disinfectants.

In fact that was a half staff and they could have gotten away with less than half the workers there. Restaurants of that sort get by on slender margins. So slender if they have even one slow night in normal times they send employees home and temporarily reduce hours for staff. Now they are trying to make it on something less than a quarter of the business they used to do this time last year, maybe even less than 1/6th the tabs. People who are not trained in finance can understand when it is explained to them how margins work, but they do not inuitively think that way otherwise.

Thake the Bone Fish Grill as an example, it has fixed overhead, those are expenses they have no matter how many customers do or do not walk through their doors and does not matter how much they spend. Rent/mortgages, some taxes, franchise fees, electric and other utilities, minimum ordering requirements from vendors, etc. It takes on average for most chain restaurants 85% of the customers in an average month to pay those bills. Then there is the COGS, the cost of goods sold, that is the food and drinks, the direct costs related to serving patrons. Then there is the variable overhead, the wages, insurance related to hours they work like workers comp and UI. Those take up another 12% of all tabs they ring up to pay for those. Then there is misc. expenses and is a major reason bars and restaurants have such a hard time making a go of it, these can just kill a business, they can vary wildly year to year and month to month. A power outage of justa day can reduce revenue enough to turn a profit for the month into a loss.

So, the profit margin, the REAL money they make is dependent upon just a few customers each night. It can amount to maybe say 300-500 bucks. But, but they are only going to have that clear profit under normal to good circumstances about one night in three. This is why the restaurant business is so challenging. So far they got by because they were able to stem losses with government bailouts, they still lost money but between the bailouts and credit extended they were able to say they are still in business. It means however that they are going to have to up revenues by a lot to make up for the losses so far, and they realistically cannot. Unless those loans are commuted to grants they will have to repay taking up all actual profits for years to come, and they cannot raise prices higher than they already were. They had that formula down to a science, they knew to the dime what they could charge before they started to lose business.

So, my experience with dining out in a newly reopened restaurant I knew and liked for my birthday the first week of May was basically a disaster and I have not dined in a restaurant since. I will when they come up with a vaccine but not before. Now we face a second wave that promises sickness and death far worse than we have seen so far, and those snooty nations that are barring us from entering? They will get it too. Economically speaking I cannot wait to see how CNBC spins this. And remember, the USA is one giant Bone Fish Grill. Profits depend on a certain level of business and the macro economy is just as indebted to margins as the restaurant. We have incurred such losses that ALL read that and think about it ALL profits for years to come will have to be pledged to paying down the cost of this pandemic. Anyone not pledging every cent of profit to repaying the cost is cheating propbably with government/fed help at the expense of others. Yours or mine now doubt since as plumbers say shit goes downhill. And we are at the very bottom.

Here’s a question: How much unemployment fraud is out there?