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The Case of the Disappearing Jobs

I have been writing for months about the likelihood of a hard landing for our economy, and anecdotally, I see far more people who have lost their jobs this year than people who have gotten new ones. It feels like we’re careening toward a recession, and this week’s jobs data may explain that feeling.

The consensus expectation was for only a modest drop from the September 9.5 million job openings, but the Bureau of Labor Statistics (BLS) instead rolled a grenade down the hallway on Monday and reported a horrific disappearance of 617,000 job openings, down to just 8.7 million, which is the lowest since March, 2021.

Additionally, the BLS revised the September job openings number downward, making it four of the last five job openings reports that they have lowered months after the initial reports were issued.  Taking into account all of the adjustments, the latest revisions imply that the number of job openings was 848,000 less over the past 5 months, which basically means that the Fed was still hiking rates this summer on “strong” data that wasn’t strong at all. 

And the October plunge in the number of job openings means that there were just 2.2 million more openings than the number of unemployed workers, the lowest since July, 2021. 

What’s more, the number of hires also dropped in October, sliding by 20K to 5.88 million.  In other words, not only are job openings plunging, but hiring is also slowing.  …And, no, the job openings didn't disappear because people were getting hired to fill them.

As the number of job openings tumbled to the lowest in more than two years, the number of people quitting their jobs-- an indicator traditionally associated with labor market strength as it measures workers’ confidence in the ability to find a better job elsewhere--  dropped to 2.3% of total employment, the second lowest since March 2021.

In yet another sign of a cooling labor market, the executive coaching firm Challenger, Gray & Christmas Inc. said that US-based employers announced 45,510 job cuts in November, which was lower than the same month a year ago but a 24% increase from October.  Seasonal hiring is also at its lowest level for this point in the year in a decade.



I suppose we should take this all with a grain of salt--  69% of the Job Openings and Labor Turnover Survey (JOLTS) data is guesswork these days since only 31% of employers respond anymore, so who really knows?...

And, as if to ride in on a white stallion and save the Goldilocks economy narrative from #$%&! BLS, ADP reported yesterday that the private sector added 103,000 jobs last month, almost all of which came from the services sector.  The fact is that there has not yet been the sort of cumulative deterioration in the labor market that has caused previous Fed chairs to pivot quickly from rate hikes to rate cuts.

The Fed holds its two-day policy meeting next week, and markets are largely expecting it to leave interest rates unchanged. Traders in the fed funds futures market are pricing in rate cuts to begin in March on anticipation that inflation data will continue to show progress as the central bank tries to fend off a potential recession.

We have been in the “higher for longer” camp for some time, and while the sort of weak jobs data out of BLS this week certainly fortifies traders’ view that the Fed will keep rates unchanged while beginning to look for signs to pivot, we feel that recently ripping stock prices and a housing market near all-time highs will contribute to inflationary pressures over the near term and that we’re still a ways off from the pivot.

Therefore, our view is that the Fed will have to abandon its 2% inflation target in order to justify lowering rates sooner than later.  While inflation has slowed somewhat in recent months, we just have too far to go to get down to 2%.  But I’ll tell you what-- the minute the Fed hints that it will tolerate a higher inflation rate, that’s when we go limit up.

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