Inflation and Labor Market Dynamics

The August U.S. jobs report is out, pointing to a weaker-than-expected labor market. Specifically: Job creation was 22,000, below the consensus forecast of 75,000. The three-month moving average for job creation is now just under 30,000. The unemployment rate ticked up to 4.3%. Monthly earnings growth was 0.3%. Revisions for the previous two months resulted in a net loss of 21,000 jobs, also turning July's payroll growth into a negative figure. This data essentially guarantees a 25 basis point Federal Reserve interest rate cut in 12-days time The weak report also reinforces the view that the Fed should have cut rates sooner, particularly last July. It may even prompt some discussions about the possibility of a more aggressive 50 bps cut at the upcoming meeting. #economy #markets #unemployment #jobs #employment

Despite a slightly higher-than-expected payroll job gain, the June employment report was on the soft side, with downward revisions to payroll gains from prior months, a drop in temporary employment and only modest gains in wages. However, the weakest aspect of the report was the unemployment rate, which edged up from 4.0% to 4.1%. This, in itself, wouldn’t be particularly notable were it not for the fact that the unemployment rate has now risen steadily over the past 14 months from a 54-year low of 3.4% set in April of last year. Historically, a significant rise in the unemployment rate from its cyclical low has been a warning sign of imminent recession and can be added to others, such as a falling index of leading economic indicators or an inverted yield curve, that have been predicting recession for some time. On balance, we still don’t think recession is just around the corner. However, a rise in the unemployment rate provides further confirmation that economic momentum has downshifted to a lower gear, suggesting a need for increased vigilance by investors in making sure portfolios are not too exposed to a economic downturn. #economy #markets #investing

A welcome rebound The November Jobs report added further evidence of general economic health, reflecting a labor market that is slowing but not nearly grinding to a halt. After a dismal October payroll report complicated by strikes and weather, hiring rebounded by a better-than-expected 227K jobs with positive revisions adding 56K to the last two months combined. 💡 The Fed was widely expected to cut rates by 0.25% later this month, and this report cements that expectation further.   Key takeaways from the report: ➡️  ��Private sector employment accounted for 85% of job growth this month, driven by strong hiring in health care and social assistance (72K) and leisure and hospitality (53K)—two sectors accounting for roughly 1/3rd of job openings. Retail trade and transportation/utilities shed some jobs, while manufacturing hiring recovered roughly half of last month’s job losses (which included Boeing strike impacts). ➡️   Wages were stable, growing 0.4% on the month and 4% from a year ago. Wage growth continues to outpace inflation, contributing to further gains in household purchasing power. ➡️   Mixed signals from the two surveys do cast some fog on the overall signal here. In the survey of households, labor force participation ticked down and unemployment rose by 161K, a very different picture from the establishment survey’s growth of 227K. This kind of discrepancy is, unfortunately, a new norm. Since last December, household employment shows a decline of 42K, compared to payroll growth of nearly 2 million. Over time, improved data should narrow this gap, and in the meantime, we continue to lean on the “mosaic” of labor market indicators. ➡️   Unemployment may be back at its July level, but it’s not stoking the same fears. When unemployment hit 4.2% in July, it rang alarm bells on recession and inclined the Fed towards a jumbo 50bp cut. Since then, data has shown above-trend GDP growth, jobless claims remain muted, job openings are elevated and ISM purchasing manager surveys suggest employment is modestly improving. ➡️   Still, the uptick in the U-6 unemployment rate bears watching, as an increase in underemployed and discouraged workers could signal underlying labor market strain.   Altogether, stability in wages and the uptick in unemployment tilts the scales further towards a December cut, which markets have upgraded to a ~90% probability following this report. We will watch for progress in CPI after a recent stalling out in disinflation next week, but the bar seems high for a pause. More broadly, despite a shallower easing cycle, above-trend growth, real wage gains, and earnings breadth should provide support for a continued equity rally into the new year.

This chart is not a sign of a healthy labor market. The latest data show that almost 2 million people continued to claim unemployment benefits in the last week of May, the most since November 2021. The effects of uncertainty are starting to bite. These seasonally adjusted numbers from the Bureau of Labor Statistics describe a labor market where finding a job is tougher than usual at this time of year. New graduates at all levels – high school, college, and above – are entering the labor market at a precarious time. With very little churn, they could be looking for a long time. The trend in jobless claims also helps to explain the Consumer Price Index figures we saw this week. Prices for cars were down, and inflation in housing was under control. Most likely, people are putting off big purchases because they're worried about their incomes. We'll probably see more signs of rising unemployment in the next jobs report, arriving a few weeks from now. This will also reduce demand among consumers. The question is whether their caution will be enough to offset the inflationary forces unleashed by tariffs and the current administration's apparent goal of devaluing the dollar. My guess is that it won't, and we'll see higher inflation later this year. If I'm wrong, it will probably mean that the labor market has gotten much worse. Hopefully, we won't see both of those things happening... but either one is already bad enough. #joblessclaims #labormarket #economy

July’s employment report from the Bureau of Labor Statistics should give the Fed the exclamation point they have been looking for to show that the economy is slowing enough to warrant a rate cut. Market expectations have shifted firmly to a 50-bps interest rate cut at the Fed’s meeting in mid-September, rather than a 25-bps cut which had been the prevailing view prior to this report. Now handwringing will ratchet higher as to whether the Fed is in the process of successfully orchestrating a soft landing or if they have waited too long to shift their monetary policy stance. Job growth slowed more than expected in July and gains in May and June were revised lower. The unemployment rate increased 20 bps during the month and is up 60 bps over the past six months – unemployment rate changes of 50 bps or more over a six-month period have typically corresponded with recessions (see accompanying chart). Wage growth also appears to have slowed over the past couple of months. Even allowing for some volatility in the monthly data, the three-month moving average in employment growth and unemployment show an undeniable softening. Unemployment insurance claims add further evidence to the slowing trend. Initial unemployment claims have ticked higher over the past three weeks and continuing claims are at their highest level since the fourth quarter of 2021. It is difficult to call current labor market conditions weak with the unemployment rate still at 4.3%, but job gains appear increasingly lackluster across major employment sectors and the loss of momentum is undeniable. Stock and bond market participants are reacting in a way that suggests increased recession fears. Earnings reports have only fueled these concerns. The 10-year Treasury rate has fallen materially below 4.0%. Mortgage rates have also been ticking lower, which is good news for prospective home buyers. Rate cuts appear to be on the way, but macroeconomic conditions are increasingly precarious and the Fed’s September meeting may start to feel like a lifetime away if more bad news unfolds. The week ahead is not a busy one from an economic news perspective, but ISM services, mortgage delinquency, Fed Senior Loan Office Survey, and jobless claims, among others will be interesting to watch for additional information on the economy’s trajectory. What indicators are you watching for?

  Why now is not the time to quit your job without a solid plan.   While the headlines aren't officially declaring a recession, the job market is showing concerning signs of a significant slowdown that feels eerily reminiscent of 2008.   I'm seeing patterns that should give everyone pause: • Companies abruptly freezing hiring budgets mid-process • Candidates completing multiple rounds of interviews only to be ghosted • Hiring timelines stretching from weeks to months with little explanation • Job offers being rescinded at the last minute due to "changing business conditions"   These aren't isolated incidents - they're becoming increasingly common across industries.   This doesn't mean you should never change jobs, but it does mean approaching transitions with far more caution than in recent years.   The professionals weathering economic uncertainty most successfully are taking strategic steps: 1. Building financial runway: Aggressively increase emergency savings to cover 6+ months of expenses before making any voluntary job changes. 2. Focusing on recession-resistant roles: Certain functions remain essential even during downturns. Understanding which roles in your industry have staying power is crucial. 3. Strengthening skills with demonstrable ROI: Identify and develop capabilities that directly contribute to cost savings or revenue generation - these remain valuable in any economy. 4. Quietly nurturing professional networks: Build relationships before you need them, focusing on connections in stable sectors. 5. Documenting achievements meticulously: Create detailed records of your contributions, particularly those that demonstrate efficiency or cost-effectiveness.   The best time to prepare for economic turbulence is before everyone realizes it's happening.   What steps are you taking to ensure your career resilience in uncertain times?   Check out my newsletter for more insights here: https://lnkd.in/ei_uQjju   #executiverecruiter #eliterecruiter #jobmarket2025 #profoliosai #resume #jobstrategy #economicuncertainty #careerplanning #jobmarketsigns #recessionpreparation

I'm starting to stack a bunch of indicators on this; the labor markets continue to show signs of cooling. Data compiled by the Cleveland Fed show that Worker Adjustment and Retraining Notifications (WARN) are rising. WARN notices are advance notifications that some employers must provide to their employees and local governments before a large layoff or plant closing. They are typically filed 60 days before the expected layoff event. As a result, WARN notices can be thought of as a leading indicator of unemployment. The latest news is not especially encouraging. WARN notices jumped to 25,950 in May, the highest level since August 2023. While that might not seem *that* bad, it is worth noting that the hiring rate is somewhat weaker today than it was back then. Thus, it will be more challenging for these soon to be laid off people to cycle into new jobs. Expect to see the unemployment rate rise this summer. Take a look at the chart in the comments. https://lnkd.in/e8stMrTk

The Great Resignation is ending and that's good news for the prospects of a soft landing. Lots to run through from the July 2023 #JOLTS report! After two-plus years spent quitting and finding new and better opportunities at elevated rates, US workers are now voluntarily leaving their jobs at the same rate they were prior to the pandemic. This reduction in job-hopping signals that wage growth will continue to cool as employers face less pressure to attract new hires and retain current employees. This trend, plus the decline in job openings and dormant layoffs, is likely to please Fed policymakers. Quitting is coming down because job seekers are finding fewer opportunities—job openings have declined by 1.5 million over the past three months. There were still 23% more job openings at the end of July than there were on the last business day of January 2020, down from the peak of 67% at the end of March 2022. And while job openings continue to outnumber unemployed workers, the ratio of job openings to unemployed workers declined to 1.5 in July, the lowest ratio since September 2021. The labor market is still tight, but continues to loosen. The pullback in quitting is broad-based, with many sectors currently boasting quits rates equal to or below their immediate pre-pandemic levels. Most notably, quitting in two sectors that led the way during the Great Resignation has returned to early 2020 rates. Quitting in the Retail sector in July was equal to the sector’s February 2020 rate, and Leisure and Hospitality’s rate is slightly below that baseline. If quitting has moderated in these industries that experienced so much churn in recent years, then the Great Resignation is definitely behind us. The reduction in quitting and job openings is happening at the same time as layoffs remain low. The layoff rate remains unchanged over the past year and at a level that would have been an all-time low prior to the pandemic. All three of these trends are necessary ingredients for a soft landing in the US labor market, but that soft landing is still not guaranteed. The US labor market remains on solid footing, but demand for labor needs to continue declining as supply rises to meet it, all as inflation continues to cool.

The U.S. economy added 227,000 #jobs in November, according to Nonfarm Payrolls data from the Bureau of Labor Statistics. This marks a significant rebound from the near-standstill in October, where job creation was heavily impacted by the labor port strike and hurricanes Helene and Milton. The unemployment rate remained steady at 4.2%, indicating a stable job market despite ongoing economic uncertainties. Employment trends showed positive growth in health care, leisure and hospitality, government, and social assistance sectors. However, retail trade experienced job losses, highlighting the mixed nature of the current labor market. Average hourly earnings have continued to rise, indicating persistent wage pressures within the labor market. This reflects the ongoing demand for labor and potential inflationary pressures. Higher wages can lead to elevated inflation down the line as businesses may pass on the increased labor costs to consumers. Investors are grappling with the Fed’s uncertain policy path. Fed Funds futures pricing after the report was released predicts an 87% chance they will cut rates by 0.25% at the December FOMC meeting. We anticipate that the Fed will likely proceed with 0.25% rate cuts unless economic conditions necessitate more significant adjustments.