This morning’s update on initial jobless claims is both sobering and clear: the economy is contracting and the trend has legs.
There’s no debate on this point now, nor is there much to be done in the short term to alter the fate that now awaits the U.S. The wave is crashing and the unwinding will have its way. Yes, government can and should soften the blow, particularly for the least fortunate. But in macroeconomic terms, there’s no stopping the recessionary forces now unleashed.
Unfortunately, this process is still in its early stages and so the pain has only just begun. Indeed, for the first time in this cycle, last week’s new filings for unemployment benefits–a forward-looking indicator–rose above 500,000, as the chart below shows. The nation’s unemployment rate, as a result, is sure to rise further in the months to come.
For all the bearish news of the past year or so, much of it has been finance related. The fallout is now taking its toll on the broader economy, which is to say consumers, who collectively represent about 70% of GDP. If nothing else, everyone needs to recognize what awaits. The storm is here and will blow for some time.