Construction Activity Slips in June

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • The rate of housing starts in June FELL 12.3 percent to a seasonally adjusted annual rate (SAAR) of 1.17 million units;
  • The pace of single-family starts DROPPED 9.1 percent and multi-family starts TUMBLED 19.8 percent from May levels;
  • The rate of permits for new homes filed in June also FELL, down 2.2 percent to an SAAR of 1.27 million units;
  • The rate of permit filings for multi-family homes ROSE 0.8 percent in June while permits for multi-family housing units FELL 7.6 percent;
  • The rate of home completions in June was UNCHANGED from May as the 5.3 percent month-month increase in the rate of multi-family rate of completions offset the 2.3 drop in the pace of single-family home completions.

Trends:

  • Housing permits (single-and multi-family) have now declined three months in a row and the SAAR is at its slowest pace since last September;
  • Permits for single-family homes represented 66.8 percent of all permits in June, up from 64.8 percent in May;
  • At the same time, single-family homes accounted for 73.1 percent of all starts, the highest share since last August.

Data Source: Census Bureau and Department of Housing and Urban Development 

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With the cost of home-building materials increasing, permits and starts for the construction of new homes fell to the lowest level in nine months.

Whether the decline was indeed due to higher material prices or demographics is uncertain. Studies by the Joint Center for Housing Studies at Harvard and Freddie Mac suggest millennials are not buying homes at the same pace as their parents, a factor builders may take into consideration before applying for a building permit or putting a shovel in the ground.

And, even before the most recent round of tariffs called for by President Trump, the cost of 1,000 board feet of western Canadian lumber is up nearly 80 percent over the past 12 months, including about 40 percent this year, according to data from Random Lengths, a publication that covers the lumber market.

Add to that the tariff-driven increase in steel and aluminum and the building costs could put the cost of a new home out of reach for younger buyers who themselves could be struggling with student loans.

Rolled together, that could explain why the Housing Market Index, a measure of builder confidence, was flat in July as an increase in buyer traffic offset a drop in the outlook for sales six months out.

The report on permits and starts also suggested some relief for inventories as the report also noted the pace completions of single-family homes slipped slightly in June.

Hear Mark Lieberman every Friday at 6:20 am on POTUS Morning Briefing, Sirius-XM 124. You can follow him on Twitter at @foxeconomics.

1st Time Unemployment Insurance Claims Resume Decline

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • There were 214,000 1st time claims for unemployment insurance for the week ended July 7 a DECREASE of 18.000 from the prior week’s report;
  • The four-week moving average of first-time claims DROPPED 1,750 to 222,000;
  • The number of initial claims for the week ended June 29 was revised up 1,000 to 232,000;
  • Four-week moving average represented 0.143 percent of employment, DOWN from 0.144 the previous week;
  • The number of continued claims –individuals who have been collecting unemployment insurance — reported on a one-week lag, was 1,739,000 for the week ended June 30, DOWN 3,000 from the previous week’s UPWARDLY REVISED 1,742,000 (revised from 1,739,000);
  • The four-week moving average of continued claims ROSE 9,500 to 1,728,500.

Trends:

  • The drop in the number of initial claims completely wiped out the increase in filings in the prior two weeks (up 10,000 for the week ended June 23 and up 4,000 for the week ended June 30);
  • The four-week moving average of continued claims increased for the first time since the week ended April 7;

Data Source: Department of Labor

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The data set of first time claims for unemployment insurance resumed its downward trajectory after a two-week hiccup due to a resumption of pre-Hurricane processes in the U.S. Virgin Islands (where claims rose from 10,000 to 22,000) and the furloughs of auto workers in Michigan (where claims rose by more than 9,000) as auto plants continued their annual retooling for new models.

Beyond those anomalies, the claims report continued to reflect good news about the tight labor market. Indeed, the weekly report echoed the signals from the Job Opening and Labor Turnover report earlier this week which (although for May) showed a sharp, 8.3 percent, in layoffs and discharges. As a percentage of all separations, layoffs and discharges fell to 29.0 percent, lowest since the JOLTS report began in 2000.

The drop in continued claims was also presaged by JOLTS data which showed the number of hires in May at 5.75 million, the highest monthly total ever recorded in the series.

The unemployment insurance claims data suggest little or no impact of the influx of previously unemployed workers to the total labor force (employed plus unemployed). The Bureau of Labor Statistics last week reported the number of re-entrants to the labor force at 2.086 million, the largest total since February 1987, an increase of 204,000 from May. The month-month change was the largest since December 2012.

You can hear Mark Lieberman every Friday at 6:20 am on the Morning Briefing on P.O.T.U.S. radio @sxmpotus, Sirius-XM 124.

Job Openings Dip in May But Remain Above Unemployment; Hires at 17+ Year High

 By Mark Lieberman

Managing Director and Senior Economist

Highlights:

  • Job openings at the end of May SLIPPED 3.0 percent to 6.4 million from April but remained above unemployment in May of 6.1 million;
  • The number of hires ROSE 3.1 percent to 5.75 million in May
  • The ratio of job openings per unemployed ROSE to 1.09 in May;

Trends:

  • Job openings exceeded unemployed for the third month in a row;
  • The number of hires in May reached its highest level since January 2001;
  • The ratio of quits to layoffs – a sign of confidence in the labor market – was 2.2 to one in May meaning more than twice as many people left jobs voluntarily as were laid off;

Data Source: Bureau of Labor Statistics

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The JOLTS (Job Openings and Labor Turnover Survey) report for May showed a continuation of the trend we’ve seen in the labor market for several months with available jobs remaining unfilled as a skills mismatch among workers continues.

The job openings data tracks new jobs as reported in the Bureau of Labor Statistics monthly Employment Situation report. Indeed, while the monthly report is a snapshot of the labor market, the JOLTS data resemble more of a moving picture.

And, that picture has been generating rave reviews, certainly when converted to a six-month moving average to smooth some of the volatility in the monthly numbers.

The JOLTS report of job openings by industry also suggests an uptick in reported hourly and weekly earnings as some of the higher paying industry sectors: business and professional services, construction and health and education services showed relatively high ratios of unemployed to job openings. For example, the ratio was 3.6 to one in professional and business services, more than double the 1.7 to one ratio in April.

In the construction sector as well, the ratio of job openings to unemployed was 1.7 to one in May, up from 1.5 to one in April.

At the other end of the scale, the lower-paying leisure and hospitality sector had an opening to unemployed ratio of 0.5 to one in May, down slightly from 0.6 to one in April. Trade (encompassing both retail and wholesale trade) had a ratio of 0.7 to one in May down from A[til when there were 1.2 job openings for every person unemployed in that sector.

The JOLTS report projected the nation was on a pace for just under 67 million hires in 2018, up about 2.6 percent over 2017 and the highest total since the BLS began publishing JOLTS data in 2000.

The May JOLTS report suggest a pace for the number of layoffs and discharges in 2018 of 19.8 million, down from the 20.6 million layoffs and discharges in 2017 and the lowest total since the JOLTS data has been published.

You can hear Mark Lieberman on P.O.T.U.S Morning Briefing (Sirius 124) every Friday at 6:20 am Eastern Time. Follow him on Twitter at @foxeconomics.

Economy Adds 213K jobs in June; Unemployment Rate Up to 4.0% but Earnings Increase Slows

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • Number of payroll jobs INCREASED 213,000 in June;
  • Unemployment rate in June INCREASED to 4.0 percent, the first month-month increase since last August;
  • Average weekly earnings ROSE $1.72 to $930.81, a 2.7 percent year-year gain, down from a 3.0 percent year-year gain in May;
  • Average hourly earnings GREW 5¢, in June a 2.7 percent annual increase
  • Private sector jobs INCREASED 202,000;
  • Number of multiple jobholders grew 177,000, 83.1 percent of total increase in jobs
  • Prior month job totals REVISED a net 37,000: UP 21,000 in May to a growth of 244,000 jobs (from 223,000) UP in April to a gain of 175,000 (from the last report of a 159,000 increase);
  • The number of persons unemployed ROSE 499,000 as 204,000 individuals re-entered the labor force as “unemployed;”
  • Number of long-term unemployed (27 weeks or longer) ROSE 289,000 largest month-month increase since March 2010;
  • The number of person employed ROSE, by 102,000;
  • Average weekly hours REMAINED at 34.5 in June;
  • Labor force – ROSE 601,000 in June;
  • The number of persons NOT in the labor force FELL 413,000; labor force participation rate ROSE2 percentage points to 62.9 percent;
  • Employment-Population ratio REMAINED at 60.4 percent,
  • Number of retail jobs FELL 21,600, one of only two sectors to lose jobs (Utility jobs dipped 300);
  • Temporary jobs and part-time grew a combined 154,300;

Trends:

  • In the first six months of the year, the economy added 1.29 million jobs compared with 1.1 million in the first six months of 2017;
  • Number of full-time jobs FELL 89,000 in June, after a 904,0000 gain in May;
  • The month-month increase in the number of persons unemployed was the largest since November 2010, when the ranks of unemployed swelled by 565,000
  • Part-time jobs represented 17.4.0 percent of employment in June, up 0.1 percentage points from May;

Data Source Bureau of Labor Statistics

Image result for employment situation reportThen June Employment Situation report from the Bureau of Labor Statistics has almost as many warning signs as positive points.

While there is certainly good news in the month job growth, it is offset by the data showing a good chunk of those new jobs went to individual who already had jobs (multiple job holders),

On the surface it appears the strong market report in May which showed a drop in the unemployment rate drew individuals back into the labor force which led directly to an increase in the June unemployment rate.

But the unemployment rate rose without the re-entrants to the ranks of unemployed, up from 2.6 percent in May to 2.8 percent in June, matching precisely the increase in the overall unemployment rate.

At the same time the “long-term” unemployment capturing those out-of-work for 27 weeks or more as a percentage of the entire labor force rose to 0.9 percent in June from 0.7 percent in May. (The headline unemployment rate is also calculated as a percentage of the total labor force.)

The month’s drop in retail employment 21,600, was the steepest since December and suggests the tax cut – which kicked in in February with a lowering of withholding rates putting more money is the pockets of wage-earners – has not had the expected stimulative impact on the economy writ large.

Indeed, the improved hiring picture hasn’t had much of an impact on earnings which rose 2,7 percent year-year in June. Though the labor market remains tight – at least on paper – employers don’t appear to be trying to lure new hires with better pay. The number of “job leavers” those who are unemployed because they voluntarily left one job to get another, dipped in 41,000 June.

Perhaps the brightest view of the June report came in the widespread increase in jobs from an industry perspective. Retail trade and the utilities sector were the only two to show a drop in jobs in June.

The manufacturing sector showed its strongest month-month increase of the year adding 36,000 jobs. The construction sector added 13,000 jobs but jobs involving construction of residential homes added just 4,000 jobs reflecting the weak home sales market and the price increases for new homes stemming from increased tariffs. Lumber priced have been particularly affected by tariff increases.

Hear Mark Lieberman every Friday morning at 6:20 am on The Morning Briefing on POTUS on Sirius-XM 124. You can follow Mark Lieberman on Twitter at @foxeconomics.

1st Time Unemployment Insurance Claims Increase; Continued Claims Average Again at 45-year Low

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • There were 227,000 1st time claims for unemployment insurance for the week ended June 23 an INCREASE of 9.000 from the prior week’s report;
  • The four-week moving average of first-time claims EDGED UP 1,000 to 222,000;
  • Four-week moving average represented 0.143 percent of employment, UP from 0.142 the previous week;
  • The number of continued claims –individuals who have been collecting unemployment insurance — reported on a one-week lag, was 1,705,000 for the week ended June 16, DOWN 21,000 from the previous week’s UPWARDLY REVISED 1,726,000 (revised from 1,723,000);
  • The four-week moving average of continued claims FELL 3,750 to 1,719,500.

Trends:

  • The increase in the number of initial claim filings was the first since May 19 and was also the largest since then
  • The four-week moving average of continued claims dropped for the tenth straight week;
  • The four-week moving average of continued claims fell again to its lowest level since December 8, 1973, when it was 1,715,500.

Data Source: Department of Labor

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The increase in first-time claims for unemployment insurance did little to knock the labor market off course, in part because of the plethora of job openings. Indeed, those job openings contributed to the steady decline in continued claims (as measured by the four-week moving average). The continued claims series loosely reflects the pace of hiring which remains robust.

This report firmed the mid-month comparisons of claims and showed initial claims fell 5,000 from mid -May to mid-June. The four-week moving average of initial claims, however, increase 7,500 or almost 4.0 percent in the last month. The two data points send mixed signals about the trend for employment and the unemployment rate when the Bureau of Labor Statistics issued its Employment Situation Report a week from tomorrow.

Continued claims dropped 37,000 from mid-May to mid-June while the four-week moving average is down 32,500 or 7.0 percent. The “streak” of 10 straight weekly declines in the four-week moving average stretches still longer: 18 of the last 20 weeks. The four-week moving average of continued claims declined for 12 consecutive weeks from August 27, 201,6 through November 12, following a similar stretch from February 13 to April 30 that year.

An interesting note is the absence of any real impact on the claims filings of the retooling of auto plants as manufacturers gear up for a new model year. Auto workers furloughed during that period. First time claims in Michigan (not seasonally adjusted) though did increase more than 25 percent to 5,529 for the week ended June 23.

You can hear Mark Lieberman every Friday at 6:20 am on the Morning Briefing on P.O.T.U.S. radio @sxmpotus, Sirius-XM 124.

Pending Home Sales Index Down Again in May

Mark Lieberman

Managing Director and Senior Economist

Highlights:

  • National Association of Realtors’ May Pending Home Sales Index (PHSI) FELL 0.5 percent from April to 105.9;
  • Year-year the index was DOWN 2.5 percentage points;

Trends:

  • The May decrease was the third in five months this year;
  • Index is down year-year for the five straight months;
  • PHSI is essentially tracking the Census Bureau’s new homes report (also based on contracts for sale) which was flat in January and rose in February and March

Data Source: National Association of Realtors (NAR)

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In another blow to the home sale market, the NAR’s pending home sales index dropped again in May, the third decline this year, as home sales face new challenges in fears of a recession and higher interest rates.

Since the beginning of the year the average rate for a 30-year fixed rate mortgage, according to Freddie Mac, has risen for 3.95 percent to 4.57 percent, raring the average monthly payment (excluding insurance and taxes) on a $300,000 mortgage from $1,425 to $1,534.

Realtors already face significant challenges as, according to Harvard’s Joint Center for Housing Studies which said in its annual State of the Nation’s Housing report stagnant wage growth is stifling home ownership in the U.S.

Although the homeownership rate rose last year, the report noted the year-year increase was the first in 13 years. Homeownership, the report said, is down 8.2 percent among 35-44 years-olds and down 6.3 percent for 25-34-year-olds since 1987, the first year of the annual report.

The 2018 study said the profile of homeowners has changed since the initial study and is older.

“The overall aging of the US population has important implications for housing markets, with 65–74-year olds now the fastest-growing age group,” the report said. “Since older adults generally live in established households and strongly prefer to remain in their homes as they age, they have not historically added significantly to new housing demand. But given the size of the baby-boom generation, households headed by persons age 65 and over will continue to grow at an unprecedented pace in the next decade, increasing the presence of older households in both the homeowner and rental markets.”

In addition to demographics, would-be younger home-buyers carry a significant student loan debt burden which adds another hurdle to the mortgage process.

The NAR’s pending home sales report had been tracing closely the Census Bureau’s similar report on (pending) new home sales, but has begun to diverge. The government report on new home sales (contracts for sale) showed a sharp increase in May.

Hear Mark Lieberman every Friday at 6:20 am on POTUS Morning Briefing, Sirius-XM 124. You can follow Mark Lieberman on Twitter at @foxeconomics.

New Home Sales Up in May as Prices Drop Despite Increase in Material Costs

By Mark Lieberman

Managing Director and Senior Economist

Highlights:

  • Pace of contracts for new home sales ROSE 6.7 percent in May to 689,000 (Seasonally Adjusted Annual Rate);
  • Unsold inventory increased 3,000 in May to 299,000 computing to a 5.2-month supply, down from 5.5 months in April;
  • Median price of a new home DROPPED $5,500 from April to $313,000;
  • Year-year the median price of a new home was DOWN $10,600 (4.8 percent)

Trends:

  • The increase in the pace of sales was the strongest since last November when sales rose 15.2 percent month-month;
  • The median price of a new single-family home dropped for the second straight month and is at its lowest level since April 2017 ($311,100);

Data Source: Census Bureau and Department of Housing and Urban Development

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Led by a surge of home-buying in the South, new home sales spurted in May with the strongest month-month gain since last November. The increase in sales (contracts) in the South was consistent with the increase in housing permits in that region in April.

The drop in the median price of a new single-family home did not reflect the higher cost of building materials resulting from the imposition of higher tariffs by the Trump Administration. The drop in the median price – while reflecting a change in buyer activity – cane before the impact of higher prices for lumber (affecting framing and roof shingles).

In May, 46 percent of homes sold carried a price tag of less than $300,000, the highest percentage since last June.

Still, the new home sales report confirmed the still high level of builder confidence in the Housing Market Index for June. The Index, compiled by the National Association of Home Builders was down two points from May at 68. Any reading above 50 is considered positive.

 

Hear Mark Lieberman on P.O.T.U.S. (Sirius-XM 124) Friday at 6:20 am Eastern Time. You can follow Mark Lieberman on Twitter at @foxeconomics.

Unemployment Insurance Claims Fall Again; Continued Claims Average at 45-year Low

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • There were 218,000 1st time claims for unemployment insurance for the week ended June 16 a DECREASE of 3.000 from the prior week’s UPWARDLY REVISED (from 218,000 to 221,000) report;
  • The four-week moving average of first-time claims FELL 4,000 to 221,000;
  • Four-week moving average represented 0.142 percent of employment, DOWN from 0.145 the previous week;
  • The number of continued claims –individuals who have been collecting unemployment insurance — reported on a one-week lag, was 1,723,000 for the week ended June 9, UP 22,000 from the previous week’s UPWARDLY REVISED 1,701,000 (revised from 1,697,000);
  • The four-week moving average of continued claims FELL 39,750 to 1,773,750.

Trends:

  • The number of initial claim filings fell for the fourth straight week;
  • The four-week moving average of continued claims dropped for the ninth straight week;
  • The four-week moving average of continued claims fell again to its lowest level since December 8, 1973, when it was 1,715,500.
  • The Four-week moving average of continued claims has fallen in 12 of the last 14 weeks

Data Source: Department of Labor 

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With the report a couple of weeks back that the number of job openings was larger than the number of persons counted as unemployed (according to preliminary numbers for May and “final” numbers for April), it follows that unemployment claims should remain on a downward trend.

Occasional spikes in the number of continued claims reflect a skills mismatch and don’t detract from the positive labor market news.

What doesn’t follow though is stagnant wages although the report on May payrolls showed average weekly earnings up 3.0 percent year-year, the average annual growth rate remains far below pre-recession levels.

 You can hear Mark Lieberman every Friday at 6:20 am on the Morning Briefing on P.O.T.U.S. radio @sxmpotus, Sirius-XM 124.

Housing Construction Starts Hit 11-year High in May

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • The rate of housing permit filings in May FELL 4.6 percent to a seasonally adjusted annual rate (SAAR) of 1.30 million units;
  • The rate of permits for single-family home permits filed in May DROPPED, 2.2 percent to an SAAR of 844,000 units;
  • The rate of permit filings for multi-family homes FELL 8.8 percent in May to 457,000 units (SAAR);
  • The rate of all housing starts ROSE 5.0 percent in May to an SAAR of 1.35 million with virtually all the increase attributable to stronger single-family starts which ROSE 3.9 percent in May;
  • The rate of home completions in May INCREASED 1.9 percent from April driven by an11.0 percent jump in single-family home completions.

Trends:

  • The pace of housing starts ROSE in May to the highest level since July 2007 (1.354 million);
  • Housing permits FELL month-month for the third time (in five months) this year with the largest percentage month-month drop since February 2017;
  • Permits for single-family homes dropped to the lowest level since last September (831,000 units);
  • The 11.0 percent month-month jump in single-family home completions will likely exacerbate the inventory glut which rose in April to 300,000, the highest level since April 2009.

Data Source: Census Bureau and Department of Housing and Urban Development

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Builders rushed material orders to get construction started on new housing in May, before the impact of higher tariffs on lumber and other components kick in.

According to Real Clear Politics the Random Lengths Framing Lumber Index which tracks lumber prices hit its highest level ever — $512 per thousand board feet – in May, a 25 percent price increase from one year ago. The RCP report said the increase in lumber prices would add about $6,400 to the cost of a new home.

The median price of a new single-family home in April, the Commerce Department reported, was $312,400.

On top of the higher lumber prices, the Trump Administration’s imposition of higher tariffs on steel could flow through to multi-family construction either increasing the cost of construction or sharply cutting home building.

Lumber is used for shingles as well as framing in home building.

The National Association of Home Builders reported Monday its Housing Market Index, measuring builder confidence, dropped two points in June (the survey is conducted in the first 10 days of the month) to 68 as the measure of buyer traffic fell to its lowest level since last November. The outlooks for current new home sales and for new home sales six months out also dropped. The index measure of 68 though means the outlook for home sales and building remains positive (index value over 50) as it has been since July 2014.

Would-be home buyers are facing the double-whammy of higher prices and higher mortgage rates.  The median rate for a 30-year fixed rate mortgage, according to Freddie Mac, was 4.62 percent last week, an increase of almost 20 percent from 3.91 percent a year ago.

Hear Mark Lieberman every Friday at 6:20 am on POTUS Morning Briefing, Sirius-XM 124. You can follow him on Twitter at @foxeconomics.

Ho hum: Continued Claims for Unemployment Insurance Hit New Post-Recession Low

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • There were 222,000 1st time claims for unemployment insurance for the week ended May 12 an INCREASE of 11.000 from the prior week’s unrevised report;
  • The four-week moving average of first-time claims FELL 2,750 to 213,250;
  • Four-week moving average represented 0.137 percent of employment, DOWN from 0.139 the previous week;
  • The number of continued claims –individuals who have been collecting unemployment insurance — reported on a one-week lag, was 1,707,000 for the week ended May 5, DOWN 87,000 from the previous week’s UPWARDLY REVISED 1,794,000;
  • The four-week moving average of continued claims FELL 39,750 to 1,773,750.

Trends:

  • The four-week moving average of initial claims for unemployment insurance fell to its lowest level since December 13, 1969 (210,750);
  • The number of continued claims for unemployment insurance was at its lowest level since December 1, 1973 (1,692,000)
  • The four-week moving average of continued claims fell again to its lowest level since December 22, 1973 (1,756,000);
  • The Four-week moving average of continued claims has fallen in 12 of the last 14 weeks dropping more than 160,000 in that span;
  • The four-week moving average of initial claims has fallen for four weeks in a row.

Data Source: Department of Labor

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By any measure, despite the blip up in this week’s report, claims for unemployment insurance are showing unparalleled improvement which belies the trend in earnings which have not improved in synch.

The report which does match up quite nicely with the weekly claims data is the Job Openings and Labor Turnover Survey (JOLTS) showing as it does a sharp increase in the ratio of quits to layoffs/discharges, 2.14, highest ever, in the most recent JOLTS report (for March). The ratio is another indicator of market strength, with more workers willing to quit with the confidence in their ability to land another job. Of course, those “quits” are not without cost as new workers must be trained to replace those who’ve left and the replacements will take some time to get up to speed and likely be less productive in the near term.

That, of course, argues for a bump in earnings as a retention tool but employers too are affected by the market knowing they will easily be able to replace departing employees or at least temporarily take advantage of the savings in wages.

The low levels of unemployment insurance claims have also given state unemployment insurance trust funds – from which benefits are actually paid – an opportunity to recover from the Recession when states had to borrow from the federal government to maintain unemployment insurance payouts.

You can hear Mark Lieberman every Friday at 6:20 am on the Morning Briefing on P.O.T.U.S. radio @sxmpotus, Sirius-XM 124.