The U.S. Labor Market Is Moving Beyond Softening To Something More Pernicious
Headline data and increasingly unreliable official data bely the fact that job growth and labor demand are deteriorating rapidly
As has been the case throughout the year, the apparent resilience of the U.S job market continues to confound nearly everyone. June’s jobs report last week came in at 147,000 jobs, solidly above consensus estimates of 110,000 for the month and higher than all but one forecast in Bloomberg’s survey of economists.
We, too, would have been in the undershooting crowd were it not for the fact that we’re now part of GlobalData and have a phenomenal quant team that overhauled, at the beginning of the year, our NFP forecast model that we overlay against our job market data. As a result, we have correctly called the initial release in 4 of the 6 months YTD relative to consensus estimates, including last week’s shocker.
But the headline numbers bely the reality that the job market has moved well beyond merely softening to something far more pernicious.
To start, BLS has revised its data down by 203,000 jobs so far this year and further revisions to May and June data in the next two months will likely increase that delta. Of course, it’s impossible to know whether the revisions are the result of the increasingly degraded efficacy of survey-based data, hellacious budget cuts, or a truly deteriorating job market, but given the likelihood that all three factors are contributing to varying degrees, there is ample cause for concern on all fronts.
Setting aside the reliability of ‘official’ BLS data, average monthly job gains have dropped 33% this year compared to last.
Those declines are not surprising given the continued decline since January of 2024 in labor demand evident in both JOLTS data and our job openings data sourced daily directly from company and employer websites globally.
Looking at the data above, it’s worth noting here, too, that while the BLS data is down about 3% since the beginning of 2024, it indicates that labor demand has remained essentially flat for the past 12 months. LinkUp data, on the other hand, indicates that labor demand has dropped roughly 12% in that same period.
Looking back, one last time, at the magnificent soft landing, there was no reason this eventuality had to be the case.
And yet, here we are just 6 months into the new administration and it’s hard to imagine a scenario whereby someone could possibly be annihilating the economy (and the country) more quickly or more completely.
To be sure, the destruction has, for the most part, yet to find its way into the hard data (with the possible exception of GDP)….
…but as we wrote a few weeks ago, there is little doubt about how this plays out.
Leaving aside the epic corruption and the incineration of our democracy and focusing only on the most tangible impact on the economy (and, in turn, the markets), it’s baffling how blind people are to what’s coming given the past 150 days.
The list is endless but it includes, to name just a handful of items, tariffs at the highest level in 90 years, global trade and supply chains completely scrambled, ICE raids and enforcement operations, deportations to foreign gulags, travel bans, tourism annihilated, work visas revoked, student visas revoked, the Federal workforce chainsawed, IRA and CHIPS gutted, Federal assistance programs massively defunded, research funding cut, grants slashed, higher education attacked, federal appropriations channelled via state and local budgets severely curtailed, programs and funds for job training obliterated, the U.S. military deployed domestically, and, of course, unprecedented, alarming levels of chaos, insanity, and unpredictability growing by the hour, 24/7.
As we wrote two months ago, it’s a hell of blunders, madness, and deception.
The decimation of the economy that was, just 6 months ago, the envy of the world, has most assuredly begun and it’s only a matter of time before the damage to everything and everyone, everywhere, becomes too real to miss - most likely all at once.
To the list above we can add, with last week’s passage, one of the most horrific, inhumane, unjust, destructive, and hypocritical pieces of legislation ever passed in the nation’s history. Big for sure. Not so beautiful.
And as if things weren’t already bad enough, the tariff tantrums have resumed and Bad King Don and his acolytes are now amping up the Divine Right of Kings.
Given what’s transpired since our June 12th post (As the U.S. Labor Market Shows Growing Signs of Weakness, Likely Scenarios Around How This Plays Out Look Grim) mentioned previously, we’ve updated our scenario probabilities as follows:
Mild Recession:
35%30%Severe Recession:
55%55%Complete Meltdown:
10%15%
And while timing remains anyone’s guess, we’ll take the under on whatever the consensus estimates are.