The unfounded belief in U.S. "inflation" is now the most crowded bubble in human history. And for that we can thank this era's ubiquitous assholes whose job it is to herd the sheeple into unwise investments...
Needless to say, they can't afford to be wrong again this time.
The U.S. is attempting its first bailout of the middle class in history. However, it's coming under attack from the right who believe that only billionaires and stock investors deserve monetary subsidization. Therefore the economic recovery is now caught between two competing ideologies - the supply side and the demand side. While that's not getting resolved, the gambling class is doubling down on faltering recovery. Because per the Iron Law of Disney markets, the more the economy disintegrates, the more gamblers expect further and dramatic monetary expansion.
Which will be the epitaph for this era:
Search the internet for "Employer bias against long-term unemployed" and you will find article after article discussing this well known structural employment issue. Now, the COVID lockdown and attendant re-opening has finally exposed this latent disaster for everyone to see - an economy unable to re-open due to the mismatched needs between laid off workers and employers.
This article from 2014 gives a great summary of the problem. Not only is there a societal bias against the long-term unemployed, there is a bias against the unemployed period. Which is not a great problem to have in an economy that is world famous for its mass layoffs to meet the corporate earnings quarter.
"Studies found strong evidence that employers’ willingness to consider applicants dropped like a stone after the candidates had been unemployed for six months. The companies actually preferred candidates with no relevant experience to those with a background in the field but who’d been out of work for a stretch"
Corporate leaders haven’t always viewed unemployment this way. Traditionally when the economy improved and created new jobs, businesses would look to the ranks of the unemployed to fill them. Until the mid-1980s, the term “layoff” actually referred to a temporary job loss — and employers were expected to rehire these workers as soon as the economy turned up again"
This chart shows that it takes years to clear the long-term unemployment backlog. And most of that "resolution" comes as a result of workers dropping out of the workforce and "retiring" early.
Anyone who has worked in corporate America knows exactly what the problem is - HR departments are scanning only for exact qualifications. They are more interested in specific skills than attitude and aptitude, so they filter out anyone who does not have the exact qualifications. They're not willing to take a chance on someone who needs to be trained or who has skills that are deemed "obsolete". I saw this all the time during my IT career. Not only do they want the exact system and platform, they want you to have experience with the latest version.
Low wage establishments have a somewhat different problem. They don't pay high enough wages to retain employees, so they are constantly churning through a marginally attached workforce that is roaming constantly from one employer to the next.
This battle between the Reaganite supply side which has been ascendant for forty years and the newly resurgent Keynesian demand side which has implemented the most humane unemployment program in U.S. history will be the frictional theme of this "recovery".
The demand side is worried that if the unemployment programs end early, the long term unemployed will be stranded without income and no way of getting back into the workforce. Mass homelessness will be the end result. The supply side is worried that if they don't punt everyone off of unemployment, then employers won't find their ideal candidates in the haystick of the mass unemployed. The fact that entire families will be obliterated, is collateral damage.
Now we face a situation where policies differ from state to state. Many states are once again requiring mandatory work search, which was suspended during the pandemic. And some red states (South Carolina, Montana) have already decided to prematurely end the Federal pandemic assistance programs that Congress passed in March. Meaning they are going to have a major homeless problem in the near future.
I highly doubt blue states will take the same path of curtailing extended unemployment. All of which points to an extremely uneven recovery and an economy that languishes well below its potential output. In other words, until HR departments and corporate management decide to loosen up their hiring criteria for the first time in modern history, we will be reading about the "critical labor shortage" and the mass unemployment problem on the same pages at the same time. And of course the two sides will be blaming each other constantly.
Getting back to the casino, due to today's disastrous jobs number, the stock market ended higher once again led by cyclicals. Why? Because belief in fake inflation is now the last super bubble. So it doesn't really matter what bad data rolls in, these people are now wed to the belief in inflation regardless. It's at the very core of their 2021 investment hypothesis.
Recall that year over year March 2020 through April 2021 was the best 12 months for stocks since the 1930s. So what to do but plough massive amounts of money into stocks after the best year on record.
After all, flows follow performance.
The Dow is entering its 60th week of making new highs.
A good time to be ploughing record amounts into stonks? We will soon find out.
