Intermarket Analysis Throught Macro and Technical Methods
#43 Observer: The Labor Market
The labor market has very particular characteristics in terms of its measurement:
- It has qualitative nuances, such as wages and productivity.
- It has quantitative nuances, which are complex to measure.
- The elasticities of this production factor as an adjustment variable vary from industry to industry.
- It is sensitive information for both individuals and corporations.
- There is an overabundance of reports that attempt to measure the same thing with different results.
Because of all this, the collection and methodologies of the data-loading process for sector analysis become a determining factor. In the appendix, a summary of the information sources used here is provided.
Labor Market: Current Situation
Jobless Initial-Continuing Claims: Historical Perspectives.
- Since 1973, it has been a necessary condition for a recession that both metrics (Initial and Continuing Claims) are rising.
- These metrics are weekly data, which we average over 4 periods to filter out volatility.
This gives us an understanding of the importance of these variables in the past, but it tells us nothing about the current trends.
Jobless Initial-Continuing Claims: Present Trends Since the Inversion of the Yield Curve.
When you see them on the same chart.
The current trend shows an economy with:
- Volatility in layoffs without a defined trend.
- An inability to resolve pending unemployment insurance claims.
- This inability arises precisely when the yield curve inverts.
Of course, this is not sustainable over time, and the unemployment rate will tend to rise.
Some important points:
- The data I’m showing has a minimal margin of error. It reflects the weekly claims for unemployment benefits. It’s the accounting of payments made by the state.
- It’s the freshest data on the labor market.
- There’s no room for human error because everything is digitalized, and what’s recorded are the actual payments made.
Unemployment: Historical Perspective
Again, a necessary condition for a recession is that unemployment is rising. Nothing we didn’t already know.
Unemployment: Present Trend
The current trend is upward. It’s no coincidence that the inversion of the yield curve has modified the previous trend, slowly pushing it higher.
- The current trend is upward.
A.D.P. Changes in Employment Since the Inversion of the Yield Curve.
In July 2022, the yield curve inverted:
- Changes in job positions have only fallen since then.
Labor Market: A.D.P as a Data Source
ADP (Automatic Data Processing) is a global leader in payroll, HR, and outsourcing solutions. Founded in 1949, it serves over 920,000 businesses with services like payroll processing, benefits, compliance, and data analytics. ADP is also known for its National Employment Report, which tracks U.S. private-sector jobs through data from over 500,000 companies and their payrolls registered in the U.S. Its mission is to simplify and optimize workforce management for companies of all sizes.
Indeed Job Postings.
The same story repeats itself. It’s hard not to see the general pattern and the moment it begins, which is precisely when the yield curve inverts or when that inversion is anticipated.
Labor Market: Indeed as a Data Source
Indeed is one of the largest job platforms in the U.S. It gathers data from thousands of job postings and applications to analyze hiring trends, talent demand, and salary evolution. Through its Hiring Lab, it produces real-time reports on the labor market, using aggregated data to track hiring activity and employment shifts by sector.
Conclusions
- If these trends continue, the question is no longer “if” we will have a recession, but “when” we will have a recession.
- There is consistency between privately and publicly collected data, despite the different sources of information.
- There is consistency with the macro analysis of monetary policy. It’s no coincidence that since July 2022, exactly the month the yield curve inverted, job creation has fallen and unemployment claims have become unresolved.
- There is consistency with other labor reports, such as the Non-Farm Payroll, where job creation is only occurring in the public sector.
