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Slowing job growth doesn\u2019t mean a recession, but today’s jobs report<\/a> tells me that the significant job gains we were accustomed to in the early part of the COVID-19 recovery period are ending, which ties nicely to how I thought labor would recover after COVID. <\/p>\n Even though the headline number on the report today beat estimates, we are entering a new phase of the economic cycle, which means you need to know where to look to get clues for a recession.\u00a0The BLS jobs report data isn\u2019t the best recession<\/a> indicator, which we can all see since the recession of 2023 \u2014 forecast by so many \u2014 didn\u2019t occur. <\/p>\n Here are my three key points on the labor market recovery since I retired my COVID-19 recovery model<\/a> on Dec. 9, 2020:<\/p>\n 1. Job openings should get to 10 million. <\/strong>(We eventually got to 12 million<\/a><\/strong>) We’re now down to 8.8 million.<\/strong> Let’s take a look at today\u2019s jobs report.<\/p>\n From BLS<\/a><\/strong>:Total nonfarm payroll employment increased by 216,000 in December, and the unemployment rate was unchanged at 3.7 percent, the U.S. Bureau of Labor Statistics reported today. Employment continued growing in government, health care, social assistance, and construction, while transportation and warehousing lost jobs.<\/em><\/p>\n Here are the jobs that were created and lost in the previous month:<\/p>\n In this jobs report, the unemployment rate for education levels looks like this:<\/p>\n It\u2019s jobs week, so we had four total reports. The job openings data was interesting because the quits percentage and hires are now below COVID-19 levels, which means the Federal Reserve i<\/a><\/strong>s too restrictive with their policy today since the growth rate of inflation has fallen more than they thought. <\/p>\n However, the labor market isn\u2019t breaking: jobless claims data is almost below 200,000. I will not go into full recession mode until this data line breaks over 323,000 on the four-week moving average. Don\u2019t make the same mistake so many Wall Street people did in 2022-2023 by thinking a slowing down is a job loss recession. We aren\u2019t there yet.<\/p>\n Of course, the 10-year yield had a wild day today. It shot up toward 4.08%, then fell to 3.96% after the poor ISM service print, and ended the day 4.5%. Some people might not understand yet how bad the ISM service print was, which could be one reason bond yields header higher later in the data.<\/p>\n Here is the chart of the 10-year yield before jobs Friday. The trend was going lower, but we hit a critical resistance level of 3.80%:<\/p>\n So, what do we make of the labor market after jobs week? Yes, it’s getting softer as the job openings\/quit percentage data has been telling us. The significant job gain reports are past us now, and we are starting to get back to our regular pre-COVID-19 trend of job growth data.<\/p>\n Does this mean the labor market is breaking? No, but we don\u2019t want the Fed to wait for jobless claims to break above 323,000 on the four-week moving average to cut mortgage rates<\/a>. So, hopefully, the Fed realizes they overhiked and should be doing cuts to land the plane since the inflation growth rate has fallen faster than they thought.<\/p>\n
2. We should get back all the jobs lost to COVID-19 by September of 2022. That checked off roughly on schedule, see here<\/a>.
And the third is the most important one at this stage of the cycle:
3. If we didn\u2019t have COVID-19, the total employment in America would have been between 157 million-159 million today. We are there now, and since population growth is slowing down, we shouldn\u2019t have big labor reports going out, which will be perfectly normal.<\/p>\n\n