Jobless Claims: It’s a Trend

For five years I have been cautioning against reading too much into the U.S. weekly initial jobless claims readings, but there is in fact a trend. Behind the various ups and downs that the financial press has tried to latch on to along the way, there is a decline, with fewer people applying for unemployment as time goes on. It is a slight decline, about 800 per week over the past five years, impossible to pick out in the short term from a number that fluctuates by 10,000 or more from one week to the next, but easy to see if you look at six months or more all at once. Many observers have been waiting to see weekly initial jobless claims fall below 300,000. When that happened in July it was possibly a fluke, but it’s happened five more times since.

Initial jobless claims is mainly a proxy measure for staffing cuts by financially distressed businesses. It is now at a level that is consistent with a strong, healthy job market. Obviously, in other ways that are more important, the U.S. job market is not so strong as we would hope, but the problems are not stemming from large numbers of employers that find themselves overextended. The job market is still sluggish, and as it (we can hope) gradually returns to a normal level of movement, that will tend to keep weekly initial jobless claims up near its current level, probably eventually rising above 300,000. But it depends. The job market has changed and some employers are trying to be quicker in their hiring. In theory, that could keep unemployment claims down as more workers who are losing their jobs are hired for new jobs before they have a week of actual unemployment.

The Ballad of eBay and PayPal

EBay and PayPal are preparing to split next year. It is all too easy to see this story in metaphorical terms — a corporate couple of the online auction era, their glory days behind them, no longer able to make the sacrifices required to stay together. The story has all the hallmarks of those hyperemotional breakup songs of pop music: foolish personal mistakes and communication failures covering over deeper problems and a much more profound mutual failure. It could just as easily be a soap opera scene. “You don’t understand me anymore!” PayPal wails. “You just don’t care what happens to me, do you?” “Well, look,” eBay responds in a huff, “my life isn’t exactly the same as it was before either! So what have you done for me lately?”

Metaphor aside, the situation is a big mess. No business that depends on Christmas shoppers for its survival wants to have this kind of distraction hovering over it during the fourth quarter. Workers will be wondering about the future while trying to struggle through the holiday rush. Of course, the fourth quarter begins tomorrow, and that might well be the reason the announcement was made today, to get it out of the way before the respective businesses and their seasonal workers have to start dealing with the millions of eager online shoppers and their inevitable transaction problems. The carefully written corporate statement put the blame on the rapid pace of change in online commerce, an oblique reference to Apple Pay (which hasn’t even launched yet) along with other competitors such as Square. But competitive pressure is not reason enough to dump such a big distraction on the two companies the day before the holiday quarter gets underway. Consider also the way the announcement hinted broadly at more big changes in the works, especially at eBay, not yet decided in enough detail to mention. Obviously there was internal dissension severe enough that the action couldn’t hold off (or be kept quiet) until January. It had to come out now. I won’t dig through all the scuttlebutt, which you can find easily enough elsewhere. It is enough to say that eBay had become a strategic impediment to PayPal, and perhaps vice versa.

Just the language that we use to discuss eBay and PayPal shows that they don’t really belong together. EBay bought PayPal 12 years ago when PayPal was a much smaller company. Now PayPal is bigger than eBay — and not just bigger, but in the world’s estimation, more interesting, more intriguing, with more potential. At the same time that PayPal has grown, eBay has faded from the public eye. There is a great deal of discussion and speculation tonight about what PayPal might be able to do as an independent company, freed from the restrictions of eBay. Everyone, except for one bitcoin blogger I found, seems to agree that the split will be good for PayPal. Logically, there should also be a discussion about what might happen to eBay, and whether it can survive financially on its own. But it is only eBay, so who really cares? Whether you agree or disagree with the popular perception of the two companies’ merits, the fact remains that even stockholders and directors can’t manage to think of eBay and PayPal as one company. They don’t share a name, management, or business purpose. They don’t go together that well even after 12 years of trying. They aren’t in the same business, so it isn’t possible for them to work that closely together.

This starts to sound like the dysfunctional relationship from the metaphor I started out with. EBay may be the older and wiser one of the couple, but it has also become complacent in a way that threatens both of them to a future of decline and irrelevance. For all I know, it could be too late to save either eBay or PayPal. But if they are to be saved, it will be by shaking things up — and getting them out of each other’s way.

Cargo Clears the Northwest Passage

I spoke too soon when I said it wouldn’t be a year for cargo in the Northwest Passage. A load of nickel, on the Nunavik, emerged from the Prince of Wales Strait on Saturday on its way to China. Ice was nearby for most of the passage, but the relatively calm weather of the Arctic this year was an advantage. Winds had pushed the ice off to one side or the other, so that it was easy to steer around. There were only a few moments when the ship had to push through ice of any substance.

One ship does not make a trend, but even this one cargo load is big enough to matter when you look at the financial rewards of delivering sooner.

Depending on the weather, the Northwest Passage could remain relatively open through the month of October.

Bigger Christmas-Season Hiring

The Christmas shopping season is barely a month away, and retailers are planning much more seasonal hiring than last year. This is no surprise if you recall the national economic conversation at this time last year. The talk had little to do with Christmas and much to do with House Republicans wanting to shut the U.S. government down for a year. There was a shutdown for a few weeks, and the threat of a shutdown lingered for five more months, putting a damper on the economy that spanned the holiday season. No such shenanigans are expected this year, so retailers are expecting consumers to spend a little more freely and are staffing accordingly. One consequence of last year’s hesitation was that many shoppers put off purchases until mid-December, then ordered online, leaving delivery companies flat-footed. Most Christmas presents were delivered on time but some were a few days late. UPS was hit the hardest, with millions of Christmas Day and later deliveries. A recurrence on Valentine’s Day proved that it was not just a matter of Christmas, but that delivery services really were not up to capacity. UPS is not particularly fond of the idea of seasonal workers but expects to hire twice as many as last year. FedEx also plans more October hiring to prepare for the year-end rush. Amazon’s plans are harder to read after new distribution centers were added this year, but some centers will be doubling their staff for the fourth quarter, and this hiring started two weeks ago.

Here are seasonal hiring plans already announced by a random pick of U.S. retail chains:

• Walmart, Target, Kohl’s: 60,000–70,000 each
• Toys R Us: 45,000; promising full training for its temporary sales staff
• GameStop: nearly 25,000 (including distribution center workers and refurbishment technicians)
• Best Buy: high-profile hiring with front-window posters at many stores, including permanent positions

The Independence Question in Catalonia

After the independence vote in Scotland, there is new activity in independence movements elsewhere, including some in regions that are better prepared than Scotland is to be independent countries. One example is Texas, an oil country like Scotland, though one that is already a functioning banking center. An independent Texas might seem less likely than an independent Scotland, though. Unlike Scotland, Texas barely has a national identity, and it faces both legal and cultural challenges in breaking away from the United States. Texas secessionists also face more than the usual political challenges that face any secession movement. Still, there is a substantial contingent of voters to support secession in any U.S. state.

The one region where secession may be seen as purely a political problem is Catalonia. Conquered by Spain ages ago but never really part of it, more prosperous than Spain and lately suffering financially as it is dragged into Spain’s financial and real estate morass, with a strong national identity that is more anti-Spanish than Spanish, Catalonia is part of Spain only as a historical accident. And now, inspired by the vote in Scotland, Catalonia has scheduled a referendum on independence.

It is a vote that Madrid has already vowed to block, and the central government has already filed court papers to do that. It is not entirely clear that Spain has the power to block the vote, though, and the anti-democratic effort will certainly result in a backlash against Spain’s corrupt and already unpopular government, not just in Catalonia, but across Spain.

Where there were questions about how Scotland might function independently, Catalonia is ready to be independent today, with a strong national identity, a functioning banking system, and a reasonably complete institutional framework. If there are obstacles, Catalonia can afford to be patient. It is hard to imagine how an economically stressed Spain can keep its grip on its largest subject region indefinitely.