If the Labor Market Stalls, it ALL stalls
June 5, 2024
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–Yields continued to tumble Tuesday, with tens -6.4 bps to 4.336%. JOLTS way lower than expected at 8.059m vs 8.355 exp. A couple of SOFR 1-yr spreads made new recent lows: Z4/Z5 at -84 (9512.5, 9596.5), down 3 on the day, and H5/H6 at -69.5, down 1.5 on the day. The front M4/M5 spread is still the most inverted and that one’s approaching the ‘four rate cut’ level at -95.25, down 7 on the day (9466.75/9562). FFQ4/FFQ5 settled -98.5 (9471.5/9570). Eases are still expected, and sentiment is again shifting to more rather than less.
–Of course the payroll data is out on Friday, but BBG had this little snippet yesterday: “…there’s more weak labor market data to come when the full Quarterly Census of Employment and Wages (QCEW) for 4Q23 is released tomorrow.”
https://www.bls.gov/cew/home.htm
| Quarterly Census of Employment and WagesQuarterly Census of Employment and Wageswww.bls.gov |
–QCEW is a BLS product. I skimmed a couple of things, but what immediately struck me was the table showing % changes in wages in the 10 largest counties in the US. Six of these, Cook, IL (Chgo), Maricopa, AZ (Phoenix), Dallas, TX, Orange, CA (LA), San Diego CA and Miami-Dade FL showed a NEGATIVE year-over-year wage!
–Another interesting snippet: (RTRS) reports Japanese real wages down 25th month in a row. The article reports that Japan nominal wage is 296,864 yen/month, or $1913.28 given the exchange rate. From google: “According to the latest figures by the Bureau of Labor and Statistics, the average salary in USA per month is $5,677 or $68,124 per year.” This week’s Market Huddle featured Tucker Scott, who mentioned similar stats to argue that the yen is way undervalued.
–We’ll see what Friday’s data brings, but the market is clearly postulating that the Fed is going to weigh the JOBS part of the dual mandate more heavily than inflation going forward. Of course, perhaps a small margin of the ftq bid yesterday had to do with the plunge in Mex Peso and in India’s SENSEX after the poor showing by Modi’s party.
–US equities seem to be cheering for a looser Fed. If the Fed leans easier due to deteriorating labor markets, that spells recession. Not likely to be equity positive. Patrick Ceresna (MacroVoices) notes that in January, 90% of stocks in the SP500 were above their 50 DMA. In March, it was 85%. Now…just 37%!
–ADP and ISM Services today.
