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The Steady Employment Market

CAMS Weekly View from the Corner - Week ending 1/5/24


January 8, 2024


We begin this New Year with a general look into the employment market.  This past week we had various measures released updating the most recent employment data for the month of December.

 

Importantly, as an aside, we couldn’t help but notice the wealth of interpretations of the current employment landscape with the recent updates.  Being we have now entered this year of 2024 it may be timely to offer a “prepare for turbulence” cautionary note. 

 

Reading this you may kneejerk to thinking we are offering an economic outlook with this cautionary phrase but to the contrary.  We are offering this caution around what we suspect, if not expect will be wildly different interpretations of important economic releases/Federal Reserve interpretations as the weeks and months unfold in 2024.

 

Let’s not forget 2024 offers various crossroads with various groups and entities from all areas of the socioeconomic spectrum having a lot to gain or lose in how these econ releases are interpreted which ultimately can lead to how they are acted upon

 

It’s election year you see and not just in the U.S. but for a large part of the globe’s population. 

 

There are significant elections across the globe impacting billions of people.  In addition, and yet a bit hand-in-glove (in terms of underlying motives via the election year) we also have the Federal Reserve along with other global central banks nearing an expected decision point of whether to begin cutting interest rates per consensus views. 

 

The factions, special interest groups, political associations, various industry groups, etcetera – the list is very long to the point of inviting a brain freeze when entering into creating an analytical matrix of the various factions with their expected views and interpretations and the weight they carry in solidifying the proverbial consensus view which can then lead to policy actions.

 

Through it all expect turbulence via what we have coined as “The Narrative” (price inflation is done/employment will remain great/economy will not miss a beat/Fed cuts rates into this nirvana for as far as the eye can see) to the point that we suspect The Narrative will morph into “The Narratives.”

 

We place emphasis on the plural form as various factions will surely be splitting in different directions with earnest as they push to create the desired consensus view that benefits their interests and desired outcomes regardless of what the actual data is offering.  It may not be fun but certainly should be interesting. 


The Employment Market with a Focus on its General Health

 

This past Thursday the private sector entity – ADP – published their monthly National Employment Report of private sector employment which is based on data derived from ADP’s client payrolls.  ADP is a payroll processing entity. 

 

Their report reflected 164,000 new jobs created in the month of December.  This continues a generally steady employment backdrop as has been unfolding particularly in recent months if not year.  This no longer reflects a rip-roaring employment backdrop nor does it offer an imminent cliff-dive concern.

 

The follow-on day – last Friday – the Bureau of Labor Statistics (BLS) corroborated this general health in the employment market with 216,000 new jobs in the month of December.  The previous two month estimates by the BLS were revised lower (revisions are the norm nothing new here) by a total of 71,000 jobs.  

 

With this the previous two month employment estimates were not as strong as initially published but by no means was these revisions game-changers relative to depicting the general health of the employment market.   

 

Rather than slicing and dicing every nuance within the various employment reports we will leave them and will move into what we think of as one of the tips of the spear type indicators for the employment backdrop known as Weekly Unemployment Insurance Claims.  Again, in this edition we are focused on getting a sense of the general health of the employment landscape.


Early November 2023

 

In early November we dedicated an edition to Weekly Claims in order to update this important measure from a previous edition we had done in the early summer of 2023 on this same measure. 

 

The short of it is back in the early summer of 2023 we noted an important developing uptrend attempt in these Weekly Unemployment Claims.  We emphasized at the time it was not offering imminent employment market issues but rather reflected our vigilance toward observing this measure.

 

Fast forward to early November’s edition whereby we shared the data from the early summer season noting how the unfolding uptrend in Claims had dissipated over following weeks and months.  Simply stated, Claims data was no longer offering any cautionary signals.  To current day, said Claims data is even better than it was in early November.

 

This past Thursday Weekly Unemployment Claims came in at 202,000. 

 

For perspective, in our aforementioned early summer edition Claims were consistently ratcheting up to nearly 270,000 Claims.  By our early November edition they had ratcheted down to 220,000 Weekly Claims.  With this context we can see our current 202,000 level is quite low. 

 

For a broader historical perspective - which further corroborates our generally healthy employment market - Claims start ringing recession concerns in the high 300-400,000 level – far above current readings.

 

This then begs a contemplative question:  Why are we talking about interest rate cuts let alone multiple interest rate cuts? 

 

The Fed has two policy mandates from Congress – price inflation and employment.  Employment is generally healthy and price inflation is still well north of the Fed’s long stated 2% price inflation target.  A very fair contemplative question if not deserving of being an outright question to the Fed Chairman.

 

This question walks us back to the beginning of this edition.  Be prepared for “The Narrative” to become “Narratives” that more fit desired outcomes for X group/entities etcetera in pushing policies forward that benefit them rather than the actual data being able to speak for itself if you will. 

 

Said data, unadulterated, may just turn out to support current policy stances being left where they are to the chagrin of X interest groups/entities. 

 

An interesting side-note/add-on to the above Fed mandates laid against the current employment/price inflation data 5 different policy voting members came out in days following the most recent meeting of the Federal Open Market Committee (the committee that sets interest rate policy within the Fed) essentially offering their confusion around the consensus view/market(s) interpretations that rate cuts will be coming in droves beginning very soon. 

 

The data to support such aggressive rate cutting is hard to find current day if it can be found at all.     

 

As it stands currently the employment market is steady – not a market that is in full desperation mode for new hires and yet one that is not imminently about to implode – steady.


I wish you well…


Ken Reinhart


Director, Market Research & Portfolio Analysis

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