Momentum in the U.S. jobs market is waning
A major jobs report revision reveals that the U.S. economy added 818,000 fewer jobs than first reported in the 12 months ending in March.
Our June 28 Global Rates & Money Flows was way ahead of this news:
A monthly highlight on trading floors was always the ‘NFP Sweepstake,’ where everyone would pay some money to guess what the U.S. Non-Farm Payroll (NFP) number would be. The winner, who would take the whole pot, was the guess that came closest to the actual number. A good strategy, therefore, would be to try and be either the highest or lowest number because, sometimes, NFPs do surprise.
That was the case last month when NFPs came in showing that 272,000 jobs were added in May compared with a consensus forecast of 185,000. Momentum in the U.S. labor market is waning though. From January 2021 to December 2022 the average NFP number was 490,000 jobs added each month. From January 2023, the monthly average has almost halved to 250,000. The unemployment rate has increased from 3.4% in April 2023 to 4% now and jobless claims are rising.
The chart above shows annualized percentage change in those in the U.S. engaged in full time employment. Full-time employment has been shrinking on an annualized basis since February this year and you can see that every one of the eight recessions (the shaded areas on the chart) since 1970 has been accompanied by a negative reading.
The U.S. jobs market remains the most important economic variable on the planet given the importance of the U.S. consumer to economic activity. It’s looking increasingly likely that a downturn is coming. (emphasis added)
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