My bunch of leading charts from a month ago on the US labor market hit the mark!
Link to that post: https://www.jamkaglobal.com/post/strong-at-face-value-but-not-so-much-under-the-hood
Challenger layoffs, Quits rate, NFIB Small Business Hiring Plans, Canada unemployment rate - all of them came really leading... And in the subsequent month we have a higher unemployment rate, lower wage inflation, and weaker job growth…
It's time to update those charts - since they seem to work...
The most important data, i.e. wage inflation... we have a drop to 3.92% YoY in the case of AHE (average hourly earnings, total private), in addition the Quits rate dropped even lower in the next month (March 2024, JOLTs report) - see Figure 1.
Bonus chart: Quits rate vs Effective Fed Funds Rate… it looks very interesting - Figure 2.
NFIB Small Business Hiring Plans has good leading properties... in April we have a drop in payrolls to 167k (total private), NFIB rebounds to 12% in April - see Figure 3.
The U3 unemployment rate increased in the US to 3.9% in April - which is consistent with the strongly rising unemployment rate in Canada - Figure 4. Data for April in Canada will be available on May 10.
However, other data do not fully confirm the rising unemployment rate: Challenger Cuts decreased in April (Figure 5), and Initial Claims do not increase at all, similarly to Continued Claims.. Figure 6.
All-in-all, this is good news for risky assets - we are moving a bit towards the Goldilocks scenario... falling wage inflation and slightly slower labor market growth...
Bonus Chart - Historically, rising unemployment rates have indicated an impending recession... see Figure 7.
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