Normally this author does not dabble much in the employment picture until the severity of the crisis is upon the United States. However, we are living through extraordinary times where the normal historical data tools are distorted not just by the pandemic, which receives the majority of the blame, but in the approach to monetary policy and economic theory which has distorted reality for lack of a better term.
Thus when the U-6 unemployment rate number starts to creep up and heads past 10% it is time to pay attention.
The bigger issues that Wall Street and the talking heads have been focusing on are the wages and earnings of the American public. The lack of attention to what has been happening structurally creating societal changes is truly alarming. The impact has been felt greatest by men over the age of 16 and with the current wave of layoffs hitting the white collar college educated younger generation disproportionately thus far, these wage figures will probably stagnate further into 1970’s levels.
This is a formula for creating economic, political, and social discontent unseen since the 1970’s which wasn’t exactly a great time for American society. It is a planned stagnation of wages which now date back to the Volcker era as Powell is copying his hero, month by month, mistake by mistake.
Meanwhile the Labor Participation Rate has also deteriorated to Carter era like levels.
The idea of diluting the earnings of Americans to contain inflationary wage spirals has begun to backfire, but that is a subject for another paper.
This brings me full circle to the Friday, June 7th Non-Farm Payrolls report. The projections are for a number between 175,000 to 180,000 new jobs added. Before I reveal my projections, I wish to remind everyone what Bloomberg Economist Anna Wong said today on X:
The US Treasury and Federal Reserve need a soft number to justify moving forward with rate cuts to help keep liquidity injected into the system, although financial conditions do not justify such an action. With the European Central Bank set to cut the odds are now in place for other central banks to follow suit. A “higher for longer” mantra would only promote and ensure currency rate distortions further complicating trade for an already weakening US manufacturing base.
This Friday’s non-farm payroll projections from yours truly are as follows with my best guess probabilities for each level.
+67,000 – 60%
+120,000-160,000 – 25%
Over 165,000 – 15%
That’s why I am inclined to believe that with revisions and the need to reflect more accurate data, the earnings data will also be flat to slightly negative along with a weakening private sector across the board.
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