I have spent much of my career among professional traders. By nature, traders are a betting crowd; if they can’t bet on the markets, they’ll bet on something else, states Murray Gunn. Editor of Global Rates & Money Flows.
A monthly highlight on trading floors was always the ‘NFP Sweepstake,’ where everyone would pay some money to guess what the US 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 US 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 halved to 241,000. The unemployment rate has increased from 3.4% in April 2023 to 4.1% now and jobless claims are rising.
The chart above shows the annualized percentage change in US employees 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. On three occasions, this metric has dipped into negative territory without a recession occurring.
I’m no expert bookie, but it seems to me that those odds tilt toward favoring a recession. What do you think?
Given the importance of the U.S. consumer to economic activity, the U.S. jobs market remains the most important economic variable on the planet. Regardless of where you live or invest, staying ahead of the U.S. stock market and eeconomictrends is worth your while. Elliott Wave International has a free must-read issue on US stocks that I suggest you check out, on www.elliottwave.com.
