The state of the labor market
Ahead of the FOMC September meeting, the labor market continues to embolden a dovish lean
This is a segment from the Forward Guidance newsletter. To read full editions, subscribe .
It’s a big week for labor market data. With everything published except for tomorrow’s NFP report, let’s round up all the data we received this week and get an idea of where things stand — and how that contrasts with the expected Fed rate cut this September.
JOLTS
It’s always important to remember how lagged the JOLTS report is as a datapoint. This report is from July and, much like the jobs report we received last month, it’s quite weak.
Job openings surprised to the downside at 7.18 million, below the expected 7.4 million.
When we contextualize that alongside how many unemployed people there are, we actually saw the jobs-workers gap go negative for the first time since the pandemic.
Although not an outright sign of recession (we spent the entirety of the 2010s in negative territory), it does highlight the relative weakness of the labor market.
A key input into the Beveridge curve is the job vacancy rate that comes from this report.
I’m a big fan of the Beveridge curve as it’s an effective way to gauge the amount of slack in the labor market. Given where we are in the Beveridge curve now, any meaningful weakening in jobs available from this point forward would likely trigger an aggressive increase in the unemployment rate.
ADP report
With the recent firing of BLS Commissioner Erika McEntarfer, ADP’s employment data has taken on increased importance in gauging labor market strength.
Although ADP gets a lot of flack since it comes out before NFP and thus has little predictive power, on a longer-term horizon the two actually track quite nicely:
Today’s ADP report came in below expectations and further emboldened the doves on the FOMC to move forward with a cut in September:
Challenger Survey
Finally, we received today’s Challenger Survey layoffs report. It showed a 13% YoY increase, which is significant.
As economist Parker Ross noted in tandem with the chart above: “Last Aug. is a tough benchmark, when layoffs were already 81% above the pre-Covid norm, so the fact we’re up 13% YoY from that elevated level means we’re now 105% above the pre-Covid norm for Aug., up from 98% in July.”
Even without the NFP report in hand, the present labor market data overall offers plenty of rationale to warrant the Fed cutting rates in a couple of weeks.
Get the news in your inbox. Explore Blockworks newsletters:
- The Breakdown : Decoding crypto and the markets. Daily.
- 0xResearch : Alpha in your inbox. Think like an analyst.
- Empire : Crypto news and analysis to start your day.
- Forward Guidance : The intersection of crypto, macro and policy.
- The Drop : Apps, games, memes and more.
- Lightspeed : All things Solana.
- Supply Shock : Bitcoin, bitcoin, bitcoin.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
You may also like
US CPI Heats Up Across the Board, Triggering "Inflation Spiral" Alert; October Rate Hike Odds Once Hit 50%. "New Fed News Agency": Watch Waller's Speech This Week
After the CPI was released, the market-implied rate hike probability first rose to 50% before falling back to 40%. Wall Street generally believes that whether action will be taken in October still depends on how the Federal Reserve assesses inflation trends. "The New Fed News Agency" noted that, unlike in August when price increases were concentrated in certain items, the stronger-than-expected performance of September's core CPI was more broad-based, further reinforcing the case for a December rate hike. The speech by Waller on Friday morning Beijing time is his last public statement before the Fed's blackout period ahead of this month's meeting. Economists are warning about an "inflation spiral," with real purchasing power and midterm election pressures interweaving.
The calm period in the US stock market is over! The S&P 500 ends its record of 53 consecutive trading days without a drop of over 1%. AI stock sell-off intensifies market concerns.
The S&P 500 Index fell by 1.1%, ending a streak of 53 consecutive trading days without a drop of 1% or more. This was the longest period of calm since January 2020.
Federal Reserve Beige Book: U.S. economy expands moderately but inflationary pressures intensify; AI boosts productivity curbing some corporate hiring demand
The latest Beige Book released by the Federal Reserve on Wednesday shows that overall economic activity in the United States continues to grow, but performance varies across regions. Consumer spending remains generally weak, and there has been little change in the labor market.
Overnight US Stocks | September Inflation Remains High, Major Indexes Decline, Coreweave (CRWV.US) Drops Over 15%
At the close, the Dow Jones Industrial Average fell by 47.96 points, or 0.09%, to 51,622.14 points; the S&P 500 Index dropped by 85.95 points, or 1.10%, to 7,719.50 points; and the Nasdaq Composite Index declined by 511.51 points, or 1.88%, to 26,692.87 points.
Crypto prices
More
