Earlier I reviewed the Federal Reserve minutes for their December meeting and I Hate to say it, but there was a bad part in it. In fact, it was this. It was something that they saw as good news but has actually now become bad news. Take a look at this.

The FED says private sector job openings as measured by the Joltz report moved back down in October but remained High. Well, the dad that came out today on the Joltz report actually undid this, revised this October number up and the numbers today came in hot as well for the current Joltz report, which we'll break down in just a moment. But what I need you to know before we go into some more detail about this wages issue is the Fed is going to use this as evidence to keep a hard mask on a hard face and a face of inflation. And even if inflation keeps coming down, the fed's going to keep being fussy and they're going to keep being fussy until that Joltz number actually meaningfully comes down.

and it just ain't yet. That means the odds of us going into a recessionary dynamic where the FED is hiking in a recession are actually higher. So what happened today increases the odds of the FED hiking in a recession and decreases the odds of the Fed you turning anytime soon. Let's get into some of the numbers in the charts so you could see why.

Just remember that my channel is only sponsored by my programs on building your wealth. Link down below: Learn everything you can about Real estate, investing, Financial analysis, fundamental analysis, stocks and Psychology money. Check out the various programs linked down below and if you want to Shadow me for a day, follow me as we explore properties for househack. You can also now do that in the link down below.

There is an expiring coupon code as we get ready to change the prices. While the latest Joltz report was a complete disaster for the Federal Reserve and we have Nikki leaks retweeting in Wall Street Journal article which we're going to break down in this video. But First, you have to understand that we just got data on the job openings and labor turnover report from the Bureau of Labor Statistics We are expecting 10 million job openings and instead what we got is another slap in the face. We got 10.458 million which is more than it was last time and the October print the last report was revised up.

This is now the third consecutive beat above expectations and an unprecedented 11 beats in the last 12. Prince This Is Not Great In other words, Jerome Powell wants to see fewer job openings, so that way we have less potential wage pressure because if wages continue to rise while inflation comes down. once we actually see wages rise above the level of inflation, we could create a self-sustaining wage price spiral where wages Rising leads prices to rise and vice versa. This would be very bad and would lead to Drum Powell having to pull Vulceros and Jerome Powell has told us that he wants to see job openings around 1.1 Well, one to one.

In other words, one job opening for roughly one unemployed person. However, right now that level sits at about 1.74 In other words, there are about 1.74 job openings for every unemployed worker who exists. Now that's a problem. While it's down from two earlier this year in March, it's still high.

And it's a little bit of an issue because while we're going to look at what the Wall Street Journal thinks about this, we have to look at the following: This right here shows you the job Openings chart and when you just simply chart it based on how many individuals or how many individual job openings there are, you can see we're at an unprecedented level in this chart since it was created. This chart began in roughly 2000 and you can see it about 2001 January 2001 and you can see it's clearly at the highest level. We have seen it at pretty much ever. With the exception of March which was a peak.

We're down off the peak a little bit, but we're pretty dang high with job openings and the concern is this: this elevated level is going to lead to a lot of wage inflation. Now, if we change this to a compound, well, let's actually go to not a compounded. Let's go to a percent change from a year ago When we look at the percent change from a year ago, at least that number is now. Negative and negative is usually what you start seeing when you're walking into a recession or walking out of a recession, right? You had negative readings over here in 2002, presumably 2001.

You add negative readings during 2008 and 9, and then coming out of uh, the Great Recession. You had briefly negative readings over here in 2017, Very, very briefly. But then of course you have negative readings during the covet pandemic. We're now going into negative territory again, which is good.

And the trend of wage inflation Nation at least as tracked by the ECI or the employment cost index is starting to inflect down. But the risk is still that because we're at such a high nominal levels of this, jolts report that maybe just maybe we're going to be in a situation of wage inflation soon, which will substantially push inflation up again. But that doesn't actually have to be the case because see, here's what could happen: We could sit at this high level of job openings and potentially and this is me putting on the Optimus hat. Okay, not like Optimus Prime like Optimus like I'm trying to be hopeful here.

Okay, the hopeful explanation for this high level of job openings. It's just that companies after Covid and people after Covid haven't quite figured out what they want to do with their lives. And so there's a lot more turnover. And if there's more turnover, of course, they're going to be more job openings.

Problem is, generally job openings lead to higher wages. What we see in the BLS reports are that people who stay at their jobs make about seven and a half percent more per year. At least in this inflationary time, people who switch jobs make about 15 percent more. So you kind of, if you put on this hopium hack hat, Have to believe that for some reason, if Jolt's numbers are going to stay high, wages would align with new jobs and people who are staying at their jobs.

But that's not what the fact is. and that's why the FED is nervous. Now some say the FED is just putting on a front to, uh, push down inflation expectations and prove their seriousness. But the numbers we got today just aren't great.

So it means more pain or longer. Or if you're somebody who really believes in long-term fundamental analysis like the fundamental analysis we do in the course member live streams every day then, and maybe you're building a portfolio around some of those up to you. What you ultimately do, right? But you might be thinking yourself, oh, I Guess that just means I've got another year to potentially go out there, grind work hard, and throw more money into my long-term Investments idea. Now others will argue Kevin Real wages are basically flat.

An index for real wages sits at 361 as of Q3 2022, which if you go to Q3 2019, we're only up two points on that. Actually, no, we're only up one point. One point means real wages have been basically flat since 2019. So for three years, actual wages have been flat when you adjust them for inflation.

If The Fed is worried. as inflation comes down all of a sudden, that number is going to Skyrocket. So this Joel's report long and short of it not that great. It just does put more pressure on the FED to iterate that they need to keep going to actually see these job openings close and remove the idea that people can just quit and get a new job.

Unfortunately, in today's BLS Joltz report, we actually saw that quits ticked up a little bit. so people are still confident enough in the labor market to quit and go find a new job. And usually when people quit and find a new job, their wages go up. Not always, but usually it's exhausting.

So what did Nick T from Nikki leaks? and uh, the Wall Street Journal have to say. Well, they gave us some of the data and then they suggested the following: jobless claims a proxy for layoffs remain low now while they're up From the spring of 2022, jobless claims not really rising at the same time, We're seeing people quitting, ticking up, and we're seeing an average of 392 000 jobs per month being added in 2022. Now, this number right here could be misleading them. and if there's any Saving Grace it's that the labor department is actually miscounting jobs that we're creating.

And maybe if we're miscounting jobs that we're creating, maybe we're also miscounting how many job openings there actually are. And this has to do with the difference between the establishment survey suggesting we're growing jobs by somewhere around two and a half million jobs over the first nine months of 2022, versus the household survey, which really shows that we've grown basically no jobs since since 2020 since the beginning of 2022.. Now that could mean that companies are still looking to hire more people than they actually have, uh, than we actually have people to fill, right? So we still have those job openings. But maybe people are moving around trying to figure out what do they want to do with their lives after coven, and that moving around and shuffling around is leading to more openings, but maybe not necessarily big pay increases.

That's where we have to watch that employment cost index, which again, so far is limited. All things are pointing when it comes to the labor market to the FED just being more aggressive until it's time to flip-flop. They talk here about the shift from consumer spending on Goods towards Services likely keeping labor demand elevated, and so how do we reconcile all of this? Well, it's tough. but basically here's what you have.

You have an ECI the employment cost index which is very high. You have job openings that are very high, You have quits which are rising, not declining. That's not good. You still have you have an unemployment report coming out on Friday which is going to give us some indication on on how high wages are moving.

But so far you still have wages growing at basically a 4.8 to 7.2 percent annualized rate. and inflation's probably going to be below both of those levels this year. and so we really got to see these numbers come down. So from the Fed's point of view, they're waiting for these numbers to come down.

The problem with that is we tend to see unemployment decline towards the end of or unemployment increase. In other words, all these numbers flip-flop towards where the FED can be essentially softer. We tend to see all these numbers flip-flop after a recession is already well underway and that kind of sucks because it means the FED could be pretty dang late in actually reacting. So the jolts numbers today not great.

It continues to reiterate the story to the Federal Reserve that unfortunately the jobs Market is just way too tight and it sucks. But you know what? all we could do is cross our fingers that we could actually get through high inflation without seeing massive, overly done wage inflation. but reasonable wage inflation where people are able to make more money without risking actual inflation. Now it's not all bad.

The Wall Street Journal Recently conducted a survey and they found that it's actually becoming slightly easier for small businesses to start hiring people. Amazon Just announced they're laying off 17 000 workers more than first planned and you're starting to see a little more cuts and less hiring, right? We saw sales force this morning announce layoffs and take a look at this particular chart. This shows you the chart of the share of small business owners who said it got easier versus more difficult to find workers. So the balance is coming.

The problem is as this hard these hard numbers keep coming in. We're just going to be in a situation of more pain for longer and again. Maybe that just gives you more of an opportunity to add to long-term positions that you think once the economy straightens out, are going to do the best for you companies. Maybe that you think have really good pricing, power, and fundamental staying power, then in that case, hey, you know what? Maybe as long as things just don't keep going straight down, maybe building over the long term is maybe we Nike Swoosh recover.

Maybe he's not a bad strategy. remember I Don't actually expect we're gonna have a V-shaped recovery here I think now we're actually going to get the real Nike Swoosh Where you go down fast. We've had most of that. You get A nice slow recovery and just lets you build build build build long-term thinking.

Thanks for watching! Check out the programs linked Down Below on your wealth and we'll see you in the next one. Bye.