Low wage services jobs are difficult to fill as we recently wrote (we continue to collect anecdotal data that supports our prior writing). Workers are choosing to stay home and collect Federal unemployment benefits rather than be productive. The moral hazard we warned of months ago is here. Should Biden and The Fed choose to extend the Pandemic Emergency Unemployment Compensation program (“PEUC”), which is due to expire on September 6th 2021 (we bet PEUC will be extended with mid-term elections around the corner), the U.S. will be one step closer to creating a permanent welfare state. Such an economy will be marked by perpetually low labor participation and low real GDP. Some would say we are already there given the anemic labor participation rate of 61.7%.

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