The Labor Market

Hey everyone and thanks for jumping back Into the Macroverse today we're going to talk About the labor market if you guys like The content make sure you subscribe to The channel give the video a thumbs up And check out the sale on intothe Cryptoverse premium at intothe Cryptoverse decom we've had a lot of Labor Market data come through this week And I I typically like to at least Provide an update on it remember that The labor market is something that moves Very slowly uh but it is worthwhile I Think to at least provide an update on It approximately once per month so we're Just going to go through all the Different things that we've been Tracking starting with the unemployment Level so the unemployment level uh we Just had an update today you can see It's up by about 334,000 this is the unemployment level And it's essentially you know it took Out this prior High uh very very Slightly now you can you can change this To look at certain categories like we Could look at 16 to 19 year olds we Could look at you know 20 to to 24 year Olds but the general view here right the General idea is that it's slowly moving Higher right take a 3month moving Average it did cool off for a little bit But it seems like it it might be

Starting to pick back up if we go over To the unemployment level reason or by Reason for Unemployment this is job losers so job Losers has now in fact put in a new Cycle high right we haven't been this High uh for job losers for a while so it Is starting to continue to move higher 3-month SMA same general Trend right so you know Again a lot of these things are are are Sort of moving in the wrong direction But it it is a very very slow process we Could also take a look at Job losers on Temporary layoff and see that that Actually came down over the last month Down by about 49,000 we could look at Job losers not on temporary layoff and See that it actually spiked up quite a Bit and then we can look at permanent Job losers and see that that is also SP Spiking up quite a bit and and maybe It's useful to look at the the Year-over-year percentage change and see That it has in fact gone positive it Went positive back in 2023 but it stayed Positive right and mean you can even see Over here that in 2007 it it sort of Went up and then it started to Accelerate later on but it is something That is is worthwhile to to keep an eye On we also have new entrance to the Labor market right that spiked back up This week we have re-entrance to the

Labor market and then we have job levers I'm not going to pause on every single One of these Metrics um and talk about them but I'm At least loading the screen so that if You are curious about every single one You can just pause the video and and and Take a look at it okay now we're going To look at the unemployment rate the Unemployment rate jumped to 3.9% which Is a new a new high now for the people That have been watching closely you'll Remember that we actually hit 3.9% back Over here in 2023 but it was eventually Revised back down 3.8% so because of Those revisions back downward this 3.9% Is now a new cycle high now of course This could be revised as well later on But just going by the data as we have it That is where it currently stands uh we Can go look at the unemployment rate per State now I'm not going to go through All 50 states but just to give you an Idea uh we have California and these you Know these haven't been updated for a Little while we'll get a new update Pretty soon um But California has has moved all the way Up to to 5.1% um Colorado is at 3.4% right it is moving Higher a lot of them are are are Generally moving higher um here's uh New York you know starting to move up a

Little bit and then maybe we'll look at At um Texas I'm trying to get some of The some of the larg ones Texas is Interesting because it actually dropped Off a little bit and then Florida want to look at at Florida as Well because Florida is an interest I've Always found the Florida to be kind of An interesting one to to track as well And it's slowly starting to pick up Steam here in terms of the uh Unemployment rate now if you think about It I mean it might be useful to to know Like the number of states where the Unemployment rate is rising and if we Look at it compared to say a month ago We are at 27 um if we look at it compared to 3 Months ago we're at 43 and at 6 months Ago 39 so the labor market is certainly Softening up right I mean there's no Doubt about it it is softening up it's Just a matter of time before it's you Know more obviously showing up in the Unemployment rate and I've said before I Mean I think whenever the unemployment Rate hits 4% that will be sort of a Milestone that might that might really Bring those rate cuts um forward right So I I don't know when 4% is going to Get hit but whenever it does I imagine The FED will feel a lot of pressure to Start cutting and my guess is that they Will start cutting at that point we can

Also look at alternative unemployment Rate measures so there's the greater Than 15 weeks metric which basically had A big move up earlier on and then it's Basically been going sideways for a While you can look at um uh job losers So this is U2 slow and steady increase And there's there's also some other Random ones unemployed plus discouraged Workers a lot of them are are slowly Moving up right so I mean you can see The business cycle Slowly playing out um but of course it Can be easy to to lose sight of that Because you know this entire window Right here spans from like you know 2022 Through today uh not a huge area on the Screen but think about everything that's Happened between then and now we can Also look at people not in the labor Force not that interesting of a chart uh We'll continue on labor force Participation Rate it basically stayed flat not a huge Change civilian Labor Force Level now The civilian Labor Force Level let's Actually look at the year-over-year Percentage change right so if you look At the year-over-year percentage change You can actually see that it's it's Dropped off quite a bit right it's all The way back down to 699 per after being You know over 2% just a few months ago Now if you look at the employment level

The employment level is interesting Because you have two different surveys That that are basically telling two Different stories you have the Establishment survey which continues to Go higher and if you look at a at a Year-over-year percentage change of the Establishment survey you will still see That it's at 1.77% now the reason why this isn't Interesting is because historical Recessions have occurred when this Metric has gone negative right now it's Still positive right it's at 1.77% so it is still uh doing okay but What's interesting interesting is that The household survey tells a a very Different story in fact it dropped again This month by 184,000 which it you know last month it Was also uh dropping slightly I mean you Can see that it's been slowly dropping Here and if you were to look at a Year-over-year percentage change of this It's only at now it's only at 0 4% and I Mean look at his you know history this Is is certainly getting into a you know A dangerous zone for the labor market uh .4% um so I I would say it might be Interesting to track this and and one of The things that might be worthwhile to Do would be to average them out right so To go over to the workbench that we have On the website to go over to say the um

The employment level and we'll add the Establishment survey and then we'll go Over here and we'll add The the household Survey and then what we're going to do Do is I mean you can zoom in here and You can see how it's diverging a little Bit here right now there's no guarantee That they continue to diverge you can See there was some form of Divergence Divergence right here in November 202 2022 and then it it picked up it picked Back up but what I thought might be Useful is to add a formula where we take The average of them so we do M1 plus M2 Ided Two and if we do that and hide the other Two that might actually give a a better Idea of what the labor market is doing And then we can also of course add on Here recessions and then you can see you Know when when the average of these two Metrics starts to really go down that is Where recessions occur and right now it It's not going down the average is not Going down at least not durably not yet But it is it seems like it might be Starting to Plateau right there it seems Like it might be finally starting to Plateau a little bit but of course we Will need you know more data I suppose To sort of sort of verify that um and we Can continue on so that's the the you Know the the survey the household survey

And the establishment survey we also had Non-farm private pay payroll employment Level that increased by about 140,000 Looking at a year-over-year percentage Change again this doesn't have a lot of Data but it is still it is still Positive 1.82% we could also go look at the Different sectors right rather than Total private we could look at Construction it it's actually it's been In a fairly healthy uptrend we could Look at manufacturing it's kind of Leveled off here and if you look at a Year-over-year percentage change it's Actually gone negative it's been Negative uh basically since July we Could also go look at other services and See that it's been going up at a at a Fairly steady clip so some sectors seem Like they're struggling and then other Sectors maybe not so much one of the Interesting ones is total temporary help Services this has been obviously talked About a lot because because historically When it's going down it's not really the Greatest um you know it doesn't really Tell a good story about the labor market And you know last month it had kind of Leveled off a little bit so I was kind Of wondering if that was going to contri Continue especially given the fact the FED stopped raising rates but another Month has gone by and it's just

Continued to drop right and so if you Were to look at a year-over-year Percentage change this actually went Negative back in in in you know 2022 and It's been negative ever since right so The labor market continues loosen up That excess continues to sort of get Taken away we could also look at Multiple job holders uh that actually Spiked up a little bit um job openings If you look at job openings it went down Slightly but still above pre-pandemic Levels in some sectors total nonfarm if You look at other sectors like you know Retail trade you can see that it's Actually near the pandemic lows right Job openings in the retail trade sector Are really low actually total government Job openings for the first time in quite A long time has actually had a pretty Significant drop I mean it had other Drops but this we haven't seen it drop Down to 900,000 right it hasn't been at That level really since 2021 right so Finally it seems like government job Openings are starting to to go down some You could look at manufacturing sector And see that actually it slightly went Back up you can go look at durable goods I believe that one uh actually dropped Down recently so I mean again like a lot Of this just been a lot of excess There's been a lot of excess over here That's been slowly going away the

Question is is can the FED pivot quickly Enough before the labor market really Starts to show more weakness than it Already is um Leisure and Hospitality Job openings slight move back up this Past this past month accommodation and Food Services slight move back up but Still in a pretty massive downtrend Looking at a year-over-year percentage Change right it's it's been negative for Quite a while so again you know the Question really is is how long is it Going to take for to spill over into the Labor market and one of the one of the Reasons I think why you haven't even Seen a larger increase in the Unemployment rate is if you look at the Number of job openings per unemployed Worker there still are more job openings Per unemployed worker according to the Data currently at around 1.45 job Openings per unemployed worker which is Why maybe the unemployment rate is still Below 4% if you look at Job quits I'm Actually going to skip I'm going to skip Job quits level and just look at the job Quits rate basically the same thing Nonfarm it continues to drop it's down To 2.1% now this is not the most Intuitive chart I think a lot of people Think it should be going up but when When people are less likely to quit Their job it it basically means that They're maybe not as confident they'll

Find a new job or maybe people will Often quit their job after they found a New job so when it is going down it Implies that the labor market is really Starting to to loosen up and you know That continues to be a fairly convincing Downtrend in terms of job quits and some Of the sectors look better than others For instance Manufacturing Um some of the excess has been removed But it still is you know right around Pre pre pandemic levels if you go look At retail trade I mean it just seems Like you know a lot of people are just No longer quitting their jobs not too Long ago you know it was at four to 5% We're quitting now it's down to 2.3% Right I mean this is a pretty large drop In terms of job quits ultimately Suggesting that while layoffs haven't Really picked up to the point that it's Gotten the market that that the Market's Attention What what has happened is that people Are are not leaving their jobs as Quickly um and and and companies are you Know they've been reducing hours right While they haven't been laying people Off as much they they have been reducing Hours you can go look at initial claims Initial claims is probably one of the Things that is is one of the better Looking indicators for the labor market Still at the low you know low 200s and

I've said before you know recessionary Initial claims would probably have to be Printing in the 300K range as long as You're in the 200k range you know the Implication is that you know there there Still are not a ton of layoffs happening Um and you can also look at initial Claims per state I'm not going to go Through all those this is non-seasonally Adjusted you can look at continued Claims continued claims do continue to Slowly move higher so while there Haven't been as you know there there Haven't necessarily been a lot of Layoffs the people that are getting laid Off are having a harder and harder time Finding a new job um we also have Continued claims per state that you can Go through if you want this is one of Those things where like if you look at Some of these states Like Nevada it continues to put in higher Lows right and and historically that's Not really the great the greatest thing And I mean like you know look at it for For New York right I mean there's you Can see sort of the the way the business Cycle plays out once it starts putting In higher lows it's only a matter of Time before the FED has to Pivot right This is what happened in 2000 this is What happened in in in 2007 2008 right It started put in higher lows the FED

Eventually pivoted and again here it's Been putting in higher lows really since October of 2022 too so it seems like It's only a matter of time before it Gets a larger Spike and then the FED Ultimately has to Pivot you can look at The number of states where the Percentage of year-over-year continued Claims is rising right now it's only It's only down to five there was a spike Over here back in 2023 it's actually Come back down that's that's a 30% Year-over-year change if you change it To 10% you're up at you're up at 26 Right but that's actually down from Recent highs of well into the 40s we can Also look at the number of states where The percentage year-over-year change in Initial claims greater than 30% you can See that that's actually currently down To 4 if you change that to only 10% it's It's at 9 okay so definitely some Weakness but not the same levels as in Prior Recessions highers is something that's Been going down uh systematically you Know really since 2022 started and this Is total non Farm um we could look at Construction hires and see that it's Mostly been relatively flat Manufacturing highers still in a Downtrend although this last month it Saw quite a big uptick retail trade Again one of these retail trade I don't

Know what it is but it just keeps Cratering in almost all different areas Whether it's hires or job openings or or Maybe not job openings or quits um it Just you know it's not really showing a Lot of resilience and here is is durable Goods slight move up this past this past Month but still in a general downtrend Right so again I mean highers are going Down job openings are going down um a Lot of that excess is being removed the Question is is can the FED can the FED Sort of thread the needle and and pivot Before they've gone too far and that's Why it's so hard because it's so hard to Know exactly when you should pivot and And by how much to to to to lead to the Market to the labor market not cooling Off as as much as it is right now you Know because you could make the argument That they need to have already already Pivoted in order to have a good chance At a soft Landing um but I I also think It's hard to blame them for not because They don't want to repeat what happened In the 1970s if you were look at the Kansas City fed labor market conditions Index um you know it it continues to and We should be getting another update on This one relatively soon it continues to To slowly drop here's the ca Kansas City Fed labor market conditions index uh Momentum indicator and it's actually you Know it's actually negative right

Now that might be uh that might be it I I think that kind of covered it I don't Want to spend you know Forever on this Stuff because you guys you guys know Where the labor market is I mean it's a Slow a really slow moving process I Think the thing to you know sort of go Back to is um when you look at the you Know at the unemployment Rate just keep in mind when Once the Unemployment rate goes above that 24mon Moving average with the exception of 1967 it tends to keep going up right Right and you know with 1967 it had sort of a spike above it and Then and up to 4% in fact and then came Back down we're now at 3.9% but it's Also seeming like instead of coming back Down it's getting another Spike up Higher from where it previously was so Again I you know I'm I'm sort of saying That the unemployment rate is you know It's moving up historically once it Crosses that 24mon SMA while it might Hesitate a little bit it tends to keep On moving higher with the exception of 19 67 where it moved to 4% and then it Moved back down to to um to 3.4% and When it moved back down to 3.4% um that was actually where the S&P Topped out so there's one example of a Soft Landing but even in that case it Still eventually became a hard Landing Um it's just that the hard Landing was

Was delayed by basically another year so I think it's important to sort of keep That idea in mind it's possible that it Plays out like 1967 but you can see out Of all the other examples once it Crossed that 24mon moving average it it Essentially just kept on climbing and And it sort of looks like that's what it Could do again um so we'll keep an eye On that and and see if that continues to Play out like most prior Cycles or if it Deviates to look more like 1967 the other thing I wanted to take a Look at was the ROI to so the ROI to low After yield curve inversion and instead Of looking at the market I want to look At macroverse metrics right and and and What I really want to look at is like The unemployment rate so if you look at The unemployment rate following Inversion of the of the 10 year or sorry Of the 10 year and 3month treasury Yields this is what it looks like right So 2022 is right here um kind of right Right in between all these other Cycles Right it's not not really much more of a Much different of a lag that we normally See in fact um and we could change this To look at other things we can maybe Look at highers and see you know how the Highers look right now we don't have as Much data for highers but the blue line Over here is the is what led into the Financial crisis and then this is 2019

This is what led into the pandemic so We're actually trending below the uh the Financial crisis with highers we could Also look at at Quits um so non-farm job quits level and See that it's kind of yeah it's in Between both the pandemic one 2019 and Then the financial crisis one again like I think you always have to remember that You need to separate sort of the macro Stuff with with the trading stuff Because markets can can ignore the labor Market for a long time until they just Simply can't anymore and once the labor Market matters it'll probably be the Only thing that matters but until you Know until we really hit that 4% level I I think you know the markets really like To ignore it as best they can um one Thing that I I wanted to to look at was Average hours worked per week and Compare that you can see that it's still Trending down actually we saw it uh tick Back up a little bit that was one that I I don't know if I actually showed that One so average hours worked per week if You look at that chart it had a pretty Big drop last month it it has recovered Slightly back up right so what Previously was the low of 34.3 now it Has come back up so we'll see if it can If it can get back above that or if it's Still you know more or less in in a Downtrend and and perhaps there's a

Couple others there there's the Coincident economic activity index that I I'd like to take a look at and to look At prior cycles and that is one that's Actually trending above prior Cycles so In some ways this cycle has been Stronger I mean the return on the S&P After yield curve inversion has Certainly been stronger than what we've Normally seen um we could also go look At at at the S rule recession indicator And and see that 2022 is kind of where All the other prior Cycles were more or Less at this time if you're not familiar With the S rule recession indicator it Essentially states that once the 3-month SMA of the unemployment rate is is 50 Basis points off the cycle low the 3month SMA of the cycle low that Happened in the last year that's when a Recession occurs although once it Crosses the trend line normally it means A recession occurred two to three months Before still hasn't crossed it yet right And we we have gotten somewhat close you Know we went all the way up to. 3 again 0. five is the threshold now we're at 0 27 we could look at the Som rule Recession indicator per state um and the Number of states where the sum rule has Triggered right the number of states Where the sum rule has triggered is now Up to up to 18 And

Then I also wanted to take a look at the Household survey so let's take a look at That and see how it compares to Prior Cycles so I'm going to get rid of the Pandemic one because I feel like it Distorts a lot of it so these are all These prior Cycles as measured from the Inversion of the 3mon and the 10-year Yield um so in all of them right in a Lot of them you can see how they went up For a while and then eventually they Roll over and it certainly looks like This current cycle is now in the process Of rolling over right it looks like it's In the process of rolling over um at This point but anyways I think that'll Wrap it up for the labor market uh we Will continue to follow the labor market To see how it continues to unfold as the Year goes on if you guys like the Content remember to subscribe give the Video a thumbs up and again check out The sale on intothe cryptoverse premium At intothe cryptoverse decom you can get Access to all these charts that you see Here and and you can keep keep TS and Labor market yourself I'll see you guys Next time bye okay

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