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 intothe cryptoverse premium at Intothe cryptoverse Docomo so the first week of every month Is fairly eventful in the sense that we Tend to get a lot of Labor Market data To take a look at the reason why this is Useful is because when the lab Market Moves it does tend to have an effect on Markets so it's worthwhile to note if It's moving or if it's still relatively Stagnant so the first thing I will start With is that the unemployment rate came In lower than expected so the consensus View for the unemployment rate this this Month was 3.9% but it actually came in at 3.7% it is noisy on on some of these Monthly time frames so I do find it Useful generally speaking to apply say Like a 3mon moving average to it it Helps sort of slice through some of that Noise so it had been moving off of this 3.5% level this 3-month moving average Low all the way up to about 3.83% it's Now stalled out here a little bit at Around that 3.8% level when looking at It on a 3-month basis so we'll continue

To follow the unemployment rate and see If it continues moving higher or not in The coming months I think a lot of it Will depend on again on whether the FED Funds rate of 5.5% is sufficiently restrictive or not We can also look at the unemployment Actually we could also look at Categories one of the C categories that Was actually quite High last month has Has fallen back down some and that's the Unemployment rate for 16 to 19 year olds If you look at it the the raw data here You can see that has actually Fallen Back down from around 13.2% down to about 11.4 if we go take a Look at the unemployment level So we're just looking at the you know The number of unemployed people you can See that it's currently at around 6.29 Million this is down from 6.51 million That we saw not too long ago so this Chart I mean shows you that it has been Moving higher although it seems to that Trend seems to have cooled off in the Last month I do want to take a look Though at at a couple things here with This metric as well as job openings so If you look at job openings this this Report came out earlier in the week you Can see that the trend Still Remains Down in terms of total job openings Available and it's interesting because You know over the last few months there

Was you know speculation by by some People wondering if this had already Bottomed out around the time that the FED hit there hit the terminal rate sort Of suggesting that if it had bottomed Out then it might mean that 5 a half% is Not sufficiently restrictive um or Perhaps we perhaps it's not and and We're just you know continuing to feel The effects of all the rate hikes but With the most recent data data point on Job openings you can see that it's Actually put in a new lower low so this One over here was at about 8.92 million It then went all the way back up to 9.5 Million and now it's fallen off to 8.73 Million but there's something we there's Something interesting we can do with This okay so we have job opening Right we have job openings and we also Have the unemployment level right so Like the number of people that are Unemployed so one cool thing we can do Is we can take job openings and divide It by the unemployment level right so You're you're basically looking at the Total number of job openings per Unemployed person okay and when you do That you get a chart that looks like This so what's f fascinating to me is Just how high this went up into early 2022 and the FED while it seems like They haven't made a lot of progress with All these rate hikes you can see that

They are making progress right the Number of job openings per unemployed Worker is falling relatively quickly now Arguably the reason why the stock market Hasn't cared is because it's still Elevated right I mean for every Unemployed worker there's still 1.34 job Openings now listen I know whenever I Talk about this sort of stuff people say Well the data is manipulated you know You can't trust it I mean in my time of Of investing going in with that mindset Is never really helpful right if we Always assume that everything we look at Is manipulated um I mean you can assume That but I don't really necessarily Think it's going to get you anywhere by Assuming That when we look at this we we can see That there is there has been an effect On the labor market and the FED wants There to be an effect on the labor Market right the FED wants the labor Market to soften up the question of Course is will they start cutting soon Enough before this thing goes much Further down you can see that in the Last three Recessions you know this thing I mean Back in the financial crisis it it it Only ever topped out at 737 over here in 2019 it topped out at 1.23 and Unfortunately we don't have data going Back before nove uh before December of

2001 not because we don't have the Unemployment rate data we do it's just That we don't have the job openings data From before that time so when you look At it we only unfortunately have it Going back to to you know just as that That recession was starting so looking At it like this this again is job Openings per unemployed worker or Unemployed person it has fallen to 1.34 if you look at the trend last month It was at 1.47 the month before that 1.49 the Month before that 1.53 1.54 158 182 167 right and all the way Back over here in December 2022 was at 1.96 but back in in March of 2022 it was At 2.01 meaning for every unemployed Person there were two job openings Available Remember this metric will likely Continue going down in the coming months Because the trend that we've been Witnessing has been job openings has Been dropping right so job openings has Been dropping so there's not as many job Openings as there were as there as there Was previously but also the unemployment Level has been generally going up but as Always it is a stochastic process right Like it doesn't just go up in a straight Line as we can see this month it is a Long process the business cycle takes For you know can take many many years to

Play out and that's why we've we've Often said you know back at the Beginning of the year I said that Markets will rally until either one of Two things either inflation re Accelerates or the labor market finally Gives way I don't think the Reacceleration of inflation is as much Of an issue right now as it was back at The beginning of the year um because we Have we have fallen down a lot now That's not to say that it can't go up it Could and if it starts to turn the Corner like it did in the 70s that will Be the next risk to pay attention to but I would argue that the labor market is More important at this point than Inflation um we've seen a lot of energy Components come down a lot um and and by The way if you were to go look at Inflation one of the things to look at Would be the the contributions per Category one of the things you might Note uh if you if you break this down by Category is that 2.33% of the you know of the of the Overall inflation because the overall Inflation's like a little over 3% Headline most of that is just coming From housing right most of that is Coming from housing if you if you look At headline inflation you can see that It's at 3.23% most of that is coming from this

Housing because most everything else has Fallen down a lot right and so I think The bigger risk is that the FED doesn't Cut quickly enough because they're Waiting for inflation to actually reach 2% where you could argue that even if They started to cut early next year the Inflation in the housing market could Continue to come down just because of All the lag effects remember the Fed Started cutting in in March of 2022 but Housing inflation contributions to CPI Did not even top out until January of 2023 so you can see just how much of an A lagged effect there is so I think that Is is the bigger risk is is you know the Disinflation I I think is is much more Likely than us going up to another Peak At this time I mean I I could be wrong About that um if it started to form a Base like it did over here in the 70s Then then perhaps it would be time to Put more weight into that idea but at This point I I don't really think There's we should put too much weight Into that um as long as the fed you know As long as the FED especially as long as As long as they stay the course that's What they've been doing so continuing on I want to look at a few other things in Terms of the labor market right so we Looked at the unemployment level we Could go take a look at the unemployment Level by reason for unemployment um job

Losers can continued to go up right so That one actually increased from 3.06 Million to 3.1 million um job losers on Temporary layoff uh has has continued to Go up if we look at uh new entrance to The labor force that one ticked down a Little bit but again a three-month Moving average shows that it's generally Trending higher then we can also look at Permanent job losers I believe this one Has also continued to sort of slowly Increase here right so that's by reason For unemployment I also we also have This chart and by the way you can access These charts um through the website we Have some interesting ones but here's The unemployment rate by state and you Know it it really it really does depend On where you are in the country uh as to What the unemployment rate looks like Like in Florida it's still relatively low like It's only at 2.8% but then you go take a look at California and the unemployment rate is At 4 8% so you can see some parts of the Country the unemployment rate is already Moving higher relatively quickly while In other parts of the country it hasn't Really been moving to give you another Example in the Northeast it's not as bad If you were to go take a look at Connecticut you can see that the Unemployment rate has basically been at

3.5% even to this day whereas if you Were to go look at say the District of Colombia it's all the way up here at 5% so it really does depend on where in The country you know you're located as To as to what the labor market looks Like in that area and perhaps just to Provide a couple more examples just for People that that might be interested Here is New York it is starting to curl up at 4.2% and um Texas might be an Interesting one to look at that one had Had been moving up but ever since it got To 4.1% back in May it has remained Unchanged we could also look at the Number of states where the unemployment Rate is rising now I'm going to we're Going to fix this chart I think to to Maybe even make it more useful the way That it's coded up right now is it only Looks at where where the unemployment Rate was last month but it might be also Useful to look at it where it was three Months ago six months ago but if you Look at it where it was last month Compared to where it is today um or the Last time it was updated you can see That 38 of the 50 states have seing the Unemployment rate go up from you know From the last couple of months right so From from one month to the other 38 States saw that go up we could also Include TC and Puerto Rico and you can

See that it actually doesn't make a Difference we could also look at Alternative unemployment measures um This is one that that is often Interesting to look at here's percentage Of Civilian labor force unemployed 15 Weeks and over that one had been moving Higher but it has dropped back down to 1.3% right so it was it bottomed out Here at 1.1 then it went went all the Way up to 1.4 now it's pulled back to About 1.3 and there's other ways we Could look at it we could look at Job Losers you this is U2 that one has has you know continued To to to move up but this last month it Stayed it stayed Flat we can also look at the labor force Participation rate I believe that one um Increased slightly from last month so From 62.7% to 62.8% there is the UN there's the Employment level this is coming out of Um so looking at total non Farm you can See that it is still going up but the Pace at which it's going up has been Slowing right you can see clearly that It's been slowing and the way to Visualize that is to look at a Year-over-year Percentage change right so if you look At the year-over-year percentage change You can see that when it has gone Negative it is corresponded to

Recessions and often times the recession Can occur before it goes negative right Like so like in 2001 the recession Started when it was at about 1.27% or so Uh maybe 872 somewhere in that ballpark In the financial crisis it started when It hit around 892 back over here in 1990 it started When it hit 1.62 today it's at 1.81% right so it has Been slowly moving down it topped out The year- of a-year percentage change Topped out at 5.2% in February of 2023 or sorry February 2022 and then if we were to go half a Year later let's say August it was at at 4.15 so from 5.2 to 4.15 and then we go If we go to the following February it Had it it had F fallen from a half a Year before down to 2.81% and then from February to August 2023 it fell all the way down to 2.05% and then from August of 2023 to Today it's now down to 1.81 right so it Is dropping right it is dropping all Prior moves the to the negative have Corresponded 2% sessions but you can see That it is not negative it's not Negative and you can look on a you could Look at a month over month percentage Change to see that the pace at which at Which total non-farm employees has been Going up the pace at which it's been

Going up has been slowly decreasing or The last few months it hasn't really Hasn't really continued to drop in the Way that it was previously you can Smooth it out with say like a 7mon Moving average if you want right and see You know over here it was at 04 51% Today it's at 0.128 you could look at Another moving average let's say like a Maybe a little bit smaller F month Moving average and see that it's down to To .1 129% um so still not negative right Still not negative and of course no Guarantee that it goes negative we can Also switch this up and look at total Private um this one has Been you know I I mean again it is still Going up but the pace which has been Going up has been has been slowing down Right so I mean applying a 3-month Moving average to this metric shows that It topped out at0 5 34% this is the Month-over-month change um back in late 2021 and then in in mid 2022 it was at 0.3% today it's at 0.1% right so again The FED has been successful in cooling The labor market off it's just that There was a lot of excess and there Still is some excess again there's for Every unemployed worker there's 1.34 job Openings there so it's not like there Are not job openings it's just that it's It's been hard to get rid of all that

Excess in the labor market we could also Go look we could go look at non-farm Private payroll employment this is Coming from the ADP Research Institute This one was not as optimistic this past Month as as what we saw today in the Report but this one if you look at a Year-over-year percentage change it Topped out around 6% and currently it's At around 2% right so still well above Zero but also trending trending down and I mean you can see it a little bit more Clearly with the month-over-month Percentage change and you could you Could apply three-month moving average To this and see that again it's a Stochastic process but this has been a Series of lower highs and lower lows and Most recently the three-month moving Average of this is the the three-month Moving average of the monthly change is At 0.77% finally in this category we can Look at total temporary Help servic Services employees this one is is Probably the the sector of the labor Market that looks the the most Concerning or one of the things that Looks the most concerning there's Definitely areas that don't look that Concerning right there still seems like There's excess in a lot of areas but in Total temporary Help Services if you Were to look at a year-over-year

Percentage change uh it is still Negative and um you know it hasn't you Know it looks like it's just continuing To drop right so up here we had about 3.18 million in temporary Help Services Back in March 2022 now it's down to About 2.92 million so it has fallen off A lot and it's a little bit it's a Little bit more concerning than the Other metrics because a lot of the other Metrics are still above their Pre-pandemic highs whereas this one is Not I mean like this one you can see That before the pandemic we were you Know we were at about 3 million right And and and today we're at a little About 3 million as well so this one I Think is is more concerning than the Other metrics but there are still Several metrics that that seem like you Know it's it's not necessarily too Concerning just yet if we were to look At Job quits so total non-farm job quits That also has been trending down um but Still trending down from a relatively High level it's currently at 3.63 Million the prepandemic high was just at Around 3.5 3 3.6 million so it's Basically back to where it was pre Pandemic we could go look at it in in Manufacturing and see what's going on There and you can see that it has been Dropping quite a bit in terms of in Terms of quits and the reason it it

Would make sense for quits to drop as as The labor market tight or as the labor Market softens up is that as the market Softens up there's going to be fewer People that are going to want to quit Their job because they might be fearful That they might not be able to find Another job whereas a couple of years Ago I think more people had confidence That they could if they their job they Could go find a new job today I I think While it is so possible to go find a new Job it was it's not as easy as it was a Couple of years ago and that generally Explains why when the economy is slowing Down people quitting their job T it Tends to go down right and you can look At a year of a year percentage change And see that I mean it's been negative For a while right it's been about Negative between negative 10 to 20% um You know for for basically a year and a Half now and um and a lot of that again Is just getting getting rid of some of The excess this is the same thing just Looking at the job quits rate initial Claims Still Remains relatively low I Think to really be in recession Territory you would need to see this Printing in the 300K area and we got you Know we got up to 265 last summer but You know it still hasn't gone up to 300K So initial claims still looks relatively Muted whereas continued claims did come

Back down some this past month or this Past week it is still trending you know A 3-mth or sorry a 3- we moving average Generally shows that it it has been Trending Higher so definitely a lot of things in The labor market that you know we could Go on and on about but I just want to Provide a very quick update I know the Markets are moving um and and remember Markets love to do this especially Especially the closer we get you know to Fed pivot often times it's around the FED pivot where where things can often Change so um just be careful out there Keep an eye on the labor market as long As it as long as it doesn't loosen up Too much Market markets love climbing The wall of worry if it does If the Fed Does achieve a soft Landing then you Know then you might not see that massive Wave of layoffs or if there's a hard Landing then of course the layoffs you Know the layoffs could come very very Quickly it all depends on on you know How quickly are are they able to Engineer a soft Landing or not do they Cut interest rates soon enough to sort Of take the pressure off of all these Businesses I think the the balance is That you still have inflation I mean if The labor market is still tight then That's going to provide pressure to wage Inflation which is going to affect CPI

And obviously the fed's not going to Like that so inflationary periods tend To change the reaction function of the FED under most circumstances with all These bankruptcies the FED would have Already pivoted long ago but they can't Really yet because they want to make Sure that they get rid of inflation Before taking their foot you know off The off the gas so I think that's the Biggest dilemma today is do they cut Quickly enough to sort of you you know To to prevent Mass layoffs or do they Keep do they keep it at do they keep Rates higher for longer too long and and Cause a a hard landing and that's what I I guess we will find out um you know Sometime the next year so anyways if you Guys like the content make sure you Subscribe to the channel give the video A thumbs up and again check out the sale On into the cryptoverse premium at Intothe cryptoverse decom make sure you Check that out link is in the Description below I'll see you guys next Time bye