Jobs Report

Hey everyone and thanks for jumping back Into the macroverse today we're going to Talk about the most recent jobs report If you guys like the content make sure You subscribe to the channel give the Video a thumbs up and also check out the Sale on into the cryptiverse premium at Into the of course we Also do have a lot of macro charts on The website as well now today what I Want to do is talk a little bit about The labor market the labor market has Been relatively resilient although we Have seen periods in the past where even During inverted yield curves the labor Market has remained resilient for some Time and then you know about a year out Or so from inversion you might start to See the labor market I begin to cool off but in the short Term I wanted to talk a little bit about This jobs report the first thing I'd Like to mention is that the unemployment Rate came in at around 3.6 percent Um and note that this is slightly lower Than where it came in back in May at 3.7 Percent so all in all the labor market Still Remains relatively resilient now One of the reasons why the market the Labor market has been so resilient is Because if you go look at things like Job openings while they are trending Down they started from relatively high Levels and one of the things we

Discussed a few months ago and and you Know sort of an ongoing discussion that We've had for for quite some time Is that yes job openings is trending in The wrong direction just like it was Trending in the wrong direction back Over here during the financial crisis And doing crash and also going Into into the pandemic here you can see That job job openings were actually Trending down but the reason why the Unemployment rate has remained so low is Because there just are still a lot of Job openings so a lot of people who may Have lost their job a lot of them maybe Not all of them but a lot of people have Been able to find other jobs elsewhere Because of just how many job openings There are There is this idea we've talked about Before is that as long as job openings Is still on Trend here then we should Still see a relatively resilient labor Market So far that seems to be the case and Because the labor market remains so Tight the the battle with inflation by The Federal Reserve will likely continue Remember they do have a dual mandate but As long as the labor market remains Secularly tight then there is no reason For the FED to Pivot to lower rates or To go back to quantitative easing right We just we understand that that is the

Phase of the market cycle that we're in Now the most recent report shows that Total private job openings are down to About 8.69 million uh this did take out The prior low of 8.71 million so it has Ticked just a bit lower than it Previously was if you want to look at Things like a year over year percentage Change you can in fact see that we are At a at a negative level right negative 16.24 percent Which of course by first glance would Appear recessionary and I'm not arguing That we're not heading towards a Recession I I do think that it's Probably the most likely outcome Eventually but in the meantime there's No denying that we were sort of coming Off here from a very high level so it's Only when you really break the prior Trend where things could start to get Um a bit worse for the labor market for Instance if six months from now if we're Looking at this and instead of you know Eight or nine million job openings if We're looking at say six or seven Million job openings then that could Start to become problematic because it's Starting to fall well below the prior Trend but again the labor market moves At a very slow pace and we have to Respect that in fact oftentimes from an Inverted yield curve you might not see Any type of peak in total non-farm uh

Until you know until a year after after Inversion I want to go through some of The other sectors This was total private we could also Look at at total non-farm here you can See it's back down to about 9.82 million Uh slightly higher than the 9.74 million That came in a couple months ago but Still trending in that direction you can Look at total government jobs there's a Big uptick there which is probably one Of the reasons why Um job openings hasn't fallen any you Know quicker than it has is government Hiring of course uh has job openings From the government has has remained Pretty steady pretty steady at these at These levels up here if you were to go To state and local you'll see a very Similar pattern if you go to Construction you'll see as somewhat Somewhat of a similar pattern as we saw With total private and total non-farm Although this recent month it actually Has ticked uh you know continued its Move back up to the upside still likely Going to be some lower levels here in The next few months but again it's a Very slow process if you look at Manufacturing it's dropping quite a bit This is probably one of the more Concerning sectors to look at you can See that it hasn't really had any Reprieve for several months now

Basically since November of 22 total job Openings in the manufacturing sector Have been slowly declining from around 829 000 to to most recently around six Hundred and four thousand looking at a Year-over-year percentage change of that Puts it currently at negative 27.84 note That it is still arguably above the Prior Trend but again you know you give It three to six months are we still Above the prior Trend or has this gone Below the prior Trend and and starting To have a material effect on the labor Market if you go look at durable goods Um you'll see that it looks somewhat Similar to manufacturing just more or Less down only since late 2022 if you Look at the non-girl non-durable goods Sector it's also been moving down Relatively quickly still arguably above The prior Trend maybe just now getting To the prior Trend so again this is one Of those things where if you're up here Screaming recession just because you Have two consecutive quarters of Negative GDP Um you might find yourself sort of Offsides right because there hasn't Really been a material move in the labor Market right I mean no one's going to Look at at this period over here in the Future and and think of it as a Recession I'm imagine you don't look at This period you know here or here and

Call it a recession you call what Eventually came after it a recession Again it's not to say that you know a Low unemployment rate doesn't mean a Recession's not coming it more or less Just means like there's one there's one Maybe off in the distance but it hasn't Arrived yet right I mean again like from It's from low unemployment rates The recessions normally arise because You know you have low unemployment the Labor Market's tight wage inflation Contributes to inflation Um the overall inflation and of course And the FED it fed wants to tighten Things up so as to not let inflation run Out of control and if they over tighten Like they often do it can lead to a hard Landing and a recession uh but you'll You know you'll drive yourself crazy Trying to predict exactly when that's Going to occur that's why we look at These longer term Trends to say yes There is a risk a real risk of one Materializing before this is all said And done but this is the reason why I Think the labor market has remained Strong is this there's have been a lot Of job openings had we started you know With job openings closer to the levels That we were back at you know maybe Before the pandemic perhaps we would Have already been in one but because There's so many job openings that's been

Able to absorb a lot of the um available Workers If you look at job openings and trade Transportation and utilities it is still On a downtrend Um still arguably though around the Prior Trend and then if you look at Retail trade you'll see a very similar Story so going over to the unemployment Level uh by reason for unemployment you Can see that job losers people losing Their jobs slowly going up though this Recent month that actually take down a Little bit if you look at permanent job Losers you can see that it has been Slowly moving up as well if you look at New entrance to the labor force it looks Like it wants to start heading back up All right you know what this is one Narrative that we have talked about Before and you can see back over here it Started to head back up and um That's where this recession began and Arguably one of the reasons we could Come to this potential conclusion is Perhaps once student loan payments Resume perhaps some people that Previously were not working decide that They now need to go get a job and to pay Off to student loans right and and Perhaps that would lead to a lot of new Entrants to the labor force that might Take away jobs from you know from people That were already in the labor force or

Looking you know already looking in Labor force so you can see that has been Moving up somewhat recently if you were To look at a year-over-year percentage Change you can see that it's currently At around 20 percent or so Um and you know you can see some Similarities in in Prior recessions Where people really come back into the Labor force but the unemployment level Is going up because of all these new Entrants uh unable unable to find work So that's where we currently are with With the labor market now we could talk About a couple other things for instance We could go look at Initial claims one of the interesting Things about this is that I mean it has Been trending higher uh but not it Hasn't really hit that 300 level yet 300 To 400 000 I do think that you're gonna Need to see some prints in the three to Four hundred thousand range before You're going to have a significant move Sustained move in the unemployment rate To save five percent or something like That again you know some of this stuff Is it's a very it's a stochastic process I think it's probably worthwhile to at Least apply a short-term moving average To it could be a three-week SMA it could Be a seven week estimate and you can see That it's slowly trending higher right Like you can see that it's slowly

Turning higher we also know though that It can take months for it to you know to To hit those uh much higher levels of Say three to four hundred thousand right It typically doesn't happen overnight There are of course some exceptions like What happened back over here in 2020 but For the most part this process is a very Long process you can also go look at Continued claims this is something that Has been trending down for a while Although I I think that the downtrend Could be coming went in sometime the Next couple of months if you look back To the pre-election year 2019 You'll see that uh sort of topped out Here in March uh trending down trended Down until about September and then Started trending up Maybe that's one of the reasons why September is not so great is is it's Kind of just a weak time and and I mean Here you can see in 2019 it was in September that that continued claim Started going back up after reaching a Local high here in March this time we Also reached a local high around that March April time frame it is trending Down but it's not trending down nearly As much as it was back over here in 2019 So there could be some seasonality to What's going on but it's actually a Worse version so far of what happened in In 2019

So that is something that I think we Still have to contend with and you know What happens when we when we fast Forward here a couple months if continue Claim starts to go back up that that Could also be a a drag on the economy But again again these things take a long Time to play out you shouldn't go out And think that the labor market just has To collapse tomorrow just because you Can see it coming oftentimes markets Won't even price in a recession until It's knocking on the door and why Shouldn't they I mean why why should They you know if if the market were to Price in a recession Well before the labor market would have Got where to go I mean you could be Waiting months or years before it Actually happens so I think that's Probably one of the reasons again you Could also go look at at initial claims Um or the unemployment rate versus Claims and and see and let's just go Ahead and hide continue claims for a Second I mean you can see that initial Claims tends to move before the Unemployment rate does and I mean it has Been moving before the unemployment rate Has and I my speculation is that initial Claims will slowly continue to go up as The months pass any given week you know It's going to be all over it's going to Be stochastic it could be a down week

Could be an up week but in general I Think we would expect this to slowly Trend higher because we're still in a Rate hiking cycle we're still in a Period of quantitative tightening where Not only the FED is lowering their Balance sheet but also Banks central Banks around the world are are sort of Um You know removing liquidity from the System and of course this should create A drag on on the overall economy Remember the stock market does not equal The economy the stock market can do Things different from what the economy Is doing at any given time but Ultimately if if we do go into a Recession based on a sustained move and Initial claims in the unemployment rate The market will of course likely price That in Um it's just that oftentimes you know a Lot of times it's easy to sort of get Ahead of yourself and and to sort of Speculate on what has to happen just Because you can see it trending in that Direction even though if it hasn't Actually materialized just yet it's just Like when you look at at treasury yield Spreads on this uh the spread between The three month and the tenure uh you Can see it's normally upon inversion or Re-invert uninversion where the Recession actually occurs you can see in

The 1980s there was a period we had a Recession during the inversion process And maybe that was because we had high Inflation and we had a very hawkish fed And they weren't willing to Pivot as Soon as maybe they otherwise would have But again you know upon the inversion You're not typically in a recession it's Upon the uninversion that should go into One and and you can see back here in in 2006 we got in we saw an inverted yield Curve in July or an inverted three month And ten year and then it wasn't until You know about a year and a half later That we actually entered into a Recession if you go look at Crash we had an inversion in in July as Well that was when first inversion Really occurred and we didn't really go Into a recession and until maybe about Like seven seven or eight months later Or so here are the three month inverted The tenure back in October And it's still you know it's still very Much inverted and it you know a lot of People might assume that this time is Different just because uh this hasn't You know hasn't gone back up to the Upside or or you know total non-farm has Remained strong you know polymerators Remain strong but normally that's Actually pretty normal that's pretty Normal for business Cycles uh for it to Play out in a very slow Manner and so

You have to be careful right you have to Be careful with the with the recession With the recession calls because uh this Stuff can can take you know quarters uh To ultimately play out but anyways we'll Keep we'll continue to keep you updated On the unemployment rate on the on the Labor market Um by the way if you're curious I know I Did a couple videos previously on or Maybe one video on this smooth recession Probabilities indicator it takes into Account the labor market it takes into Account some other things as well if You're curious uh total non-farm index Of industrial production real personal Income excluding transfer payments and Real manufacturing and trade sales and As of as of um as of May the the Probability that we're in a recession is Still less than one percent right point Six two percent still relatively low I Mean it has been trending higher but Until you see the labor market move Um you know you're probably not going to Really see this probability go up in a Significant way so it is a it's a very Long process this stuff takes a long Time to play out just please understand That the job openings have remained uh Pretty high And I think that's one of the reasons Probably the main reason why the labor Market has remained so resilient if you

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