Holy crap what happened in the Jobs market today And what does it mean for you? Well, the first thing that you need to know is there are a lot of fears circulating again about a wage price spiral. Wage price spiral is like the worst thing that we could possibly face in an economy. Wage price spiral and a fear of a spiral is what got me to sell in January of 2022. So you don't want a wage price spiral.

That's when wages are spiraling out of control, which then leads inflation to spiral out of control. And then people demand more pay because inflation's up and then that. it causes more inflation. Very bad.

And the numbers we got this morning screamed wage price Spiral I Mean consider the expectation versus reality. expectat expect I'm making up words here: Average hourly earnings. Expectations were. 3% We got 6.

That's twice. That's bad. That's a very high number. Average hourly earnings year-over-year came in at 4.5 five versus the 41 expected.

These were huge numbers. Why? Well, there's a thesis say to why and it might not actually be that bad. First of all, we need to look at when hours worked plummeted as low as it just did because hours worked is a factor in average hourly earnings. Basically what they're doing is they're saying hey, if you make a salary of let's say $7,000 a month and you worked A1 60 hours, Well, your pay is roughly 4375 per per hour, right? Uh, But if you worked, let's say 10% less hours.

So 144 hours your average pay bumps up to 48 because you're working less hours. This makes sense, right? You're getting paid the same on salary and not everybody's salary obviously. but a group of people are getting paid the same on salary whether you're working more hours or less. So when hours work, plummet, pay goes up.

Okay, well. what happened to hours worked? A disaster. An absolute disaster. This is on Ec.com by the way.

if you want to see the charts, uh, I Uh, we're making a free app by the way for this as well. but right now it's just Ec.com But anyway, look at average hourly. Uh. average hours worked per week, you're at 34.1 This plummet right here is the largest plummet that we have had, or the lowest level.

I Should say it's at the lowest level that we've had since this line right here. you know where that line is. Covid March of 2020. Okay, you want to see where the prior low was right here.

What was that? Great Recession So what happened? Well, some economists are speculating that what happened is unseasonably bad weather. Not necessarily more snow, just bad weather. That's at least one argument. Now, Some other economists are countering that and they're saying, what do you mean Like we all had the weather data.

If we all had had the weather data, why why would we have such a a bad Miss on Expectations I Mean we frankly had a four Sigma Move on. Expectations four Sigma Beat on the jobs data. which is crazy. Well, it's entirely possible that we have new adjustments for January as well and in January.

That's usually when you see a lot of people get their pay bumps now. Seasonal adjustments should make up for this, but consider what's pushing up wages in January Well, usually you have seasonal adjustments, you have the annual pay bump. again. that should show up in the adjustments.

But you know again, the way they calculate the jobs numbers also changes in January. So changes to the way they calculate things. Pay bumps in January And now this idea that who all of a sudden ours work plummeted, That could be an excuse or we're screwed. See, there are two ways to look at.

That one is yeah, that's an anomaly that's very odd and it's not going to happen again. This is the chart from Nick T This shows you private sector monthly payroll growth thre month average. Obviously we had a skyrocketing here. We had a shacking.

If we were just looking at the one month, we would have had a spike up to about here. where my mouse is. This is just the 3-month average as it's been revised because we had a revision to last month as well. So it really pushes this line up.

We do get volatility in this number and it's not necessarily a bad thing. We don't really want an unemployment recession, right? Yes, an unemployment recession would drive rate Cuts quickly Jerome Powell Made that clear Jerome Powell Said yeah. Look, if the labor market weakened, that would absolutely He used the word absolutely change our position on rates, but it's not And I think he knew that on Wednesday That's why he was so confidently able to say oh yeah, if unemployment weakened, absolutely, we'd lower rates I'm thinking to myself, yeah, he already knows what the unemployment data is going to be on Friday And sure enough, this morning, right before the numbers came out I'm like, you know, Jpat was a little hawkish on Wednesday I Have a feeling he knew these numbers came in hot Boom Blowout. Absolute blowout.

Okay, so what else do we need to know? Well, look at Atlanta Fed's real GDP now Indicator: We're coming in on Atlanta Fed, which does not even include the jobs data we just got. We got a read of 4.2% which is insane and this has been relatively accurate the last few quarters. So GDP up jobs up. We've got layoffs or we had layoffs.

but then again, now you've even got Facebook saying oh, we're hiring again. We've done our firing. Now we're back into hiring again. So you're literally in this place where it's like GDP is booming, Companies have bottomed out on their layoffs.

Maybe maybe people are starting to hire again. Maybe the idea that there's going to be a labor recession? Totally wrong. Uh, I mean yes, we did see an increase in layoffs and it feels like we're still getting layoff announcements. but now January is behind us.

and so when we look at the charts of of layoffs, you know, yeah, they ticked up in January. But can we argue that you know this is such a big deal? I mean okay, employees laid off per this layoffs.fyi web page 29,000 Who cares when you know? Apparently the Uh establishment survey told us we just had over 300,000 new jobs created and it was broad-based as well. They called this diffusion that is many different Industries It wasn't just government and education, it was everything it was Tech you name it. So this is very fascinating when you get a broadly now expanding economy which sort of essentially says hey, everything's kind of booming again.

The problem with that is what does it mean For people? betting on rates coming down well means you have to wait longer, which is frustrating. If you're making bets on interest rate sensitive stocks, you're down to a 20% chance of March I Think that's basically dead? Uh, and and the the other thing that's happening now is you're starting to unpr May right now. Instead of basically being 100% certain we were going to get cuts by May we're actually only sitting at about a 72.8% chance that we're actually going to get Cuts in May. So uh, and then if you go out to June for June you're looking At about a 96% chance that we're going to get our cut.

But what happens if you don't? Very interesting. There is actually this thesis that the Fed might not want to cut rates before the election because they don't want to appear political because everybody thinks, oh yeah, they're going to cut before the election. Of course, they're going to be biased. They might want to unbias in the other way.

I Don't know that they'll wait that long. Uh, that would certainly hurt some more of the interest rate sensitive place. But in the meantime, it's actually a pretty phenomenal thing for the economy. Overall, markets are obviously reacting very positively.

Indices are up at all-time highs. Interest rate sensitive stocks are left behind. That's because interest rate sense. Uh, stock.

Um, cut bets? Well, interest rate cut bets are being Unwound So totally makes sense. But what you also have is Bond yields up 17.8% Today on the 10-e you're at 4.04 on the 10e. But what's remarkable is as you're at 4.04 on the 10year, you actually go to the Q's You're up 1.2% on the Q's. It's insane.

The economy is just exploding. Uh, with this this sheer optimism. Uh, that? uh, maybe there is no recession after all. Which is weird because still well inverted on the 102.

which pisses off a lot of the Bears Look at the 102 right now. At the time of this recording, we're Atga 34 Bips, We've been coming straight down basically all January on the inverted yield curve. We can look forward to: CPI data coming out on the 13th Expectations Month over month 0.1 Expectations on the core Month over month3 you jump into true flation. Though true flation uh, implies that uh, inflation should be even lower now.

I Usually find that true inflation is about half a percent too high, but right now you look at what true inflation is showing, it's showing 1.34% and I'm not seeing companies still every day looking at those earning calls. Still not seeing companies actually talk about wanting to raise prices. So what does this mean? Well, it means an expanding economy with prices coming down. Jpow.

Hey, you know we want to see more evidence that inflation is coming down and is going to stay down. Okay, hopefully we get that here for January February March And we hopefully reiterate that there is no wage price spiral and inflation is not sticky. In that case, you could actually be in this insane environment where you get rate Cuts while markets are at all-time highs, which basically push them to further all-time highs. Essentially, the Nike Swoosh the Nike Swoosh thesis continues to play out.

The problem is there was the belief that the Nike Swoosh would also take interest rate sensitive stocks with it as you started unpriced Uh, rate hikes? That hasn't happened yet though. So if you're holding on interest rate sensitives, you still waiting. So hopefully you've got somewhat of a balanced portfolio where you have some exposure either either to the chips or Amazon or Facebook The question now is is it worth selling interest rate sensitive to buy the expensive others? That's a topic for a different video, but I Want to hear your thoughts in the comments down below. So these are my thoughts.

Personally, holding Firm: I'm a big believer in uh, in the strategy. It's just going to take more time to play out in this jobs report. While it may not be concerning from an inflation point of view, mostly because what have we talked about with those average hourly work? that bizarre decline that we haven't had since March of Covid, uh and 2009. Not so concerned about wage price spiral inflation.

expect expectations from University of Michigan uh, stable. More concerned, uh, about basically how long are we going to keep rates high. But then again, the only reason I'd be concerned about higher rates other than obviously interest rate sensitive stocks is that it would cause damage to the economy. That's a very Kathy Woody an argument? Nope, not the case so far though.

uh Kathy Wood might end up being wrong on this one. that, uh, the Fed's gone too far. Maybe the FED has done just enough. I Don't know.

we shall see anyway. Thanks so much for watching. Good luck out there! Crazy Crazy! Wilder Why not advertise these things that you told us here? I Feel like nobody else knows about this? We'll We'll try a little advertising and see how it goes. Congratulations man, you have done so much.

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