It's not just the BLS's data

In this piece, I discussed a few indicators of the US labour market from surveys not carried out by the BLS (Bureau of labour statistics).  I said I would combine them into a composite indicator.  This is a partial result.  I say partial, because I want to do a bit more research.

The labour indicator is a composite of the 'jobs plentiful' and 'jobs hard to get' (inverted), from the Conference Board's consumer confidence survey, and the National Federation of Independent Business's small business 'hiring intentions' and 'jobs hard to fill' questions.  I extreme-adjusted each series before combining it into the composite indicator.

There is an excellent long-term correlation between the indicator and the unemployment rate (plotted inverted in the charts.)   If anything, the chart suggests that my labour indicator sometimes leads by a few months, which means that it should start rising before the unemployment rate starts to fall, i.e., before the economy picks up.  Note how the gap has widened over the last year, which could point to bigger rises in unemployment than we have seen.

What does it look like over the last 3 years?  Notice how the unemployment rate fell (the line rises in the chart below, as the unemployment rate is plotted inversely) from the middle of last year, then started rising from January onwards, as the economy slowed.  At the same time, my labour indicator, rose, and then fell. 

The moral of the story is that the official BLS data are not obviously manipulated or incorrect, whatever Trump says.  They show much the same picture as the private sector survey data.

My forecast is that unemployment will continue to rise, because of the drag on incomes caused by the tariff hikes, uncertainty, and the loss of agricultural labour.   I may be wrong.  There are a couple of leading indicators (next post) which point towards an imminent rebound.  If that rebound happens, the Fed will definitely make no further cuts to the Fed Funds rate, because not only will inflation be rising, but the economy will be picking up again.  A further cut in the cash rate in those conditions  (forced perhaps by Trump) would be taken very badly indeed by the bond and currency markets.  Equities might love it, but expect big switches in sectoral performance.  And over all this lour the spectres of overvaluation, record stock concentration, and the AI bubble.

Many have accused me in the past of being too bearish, and perhaps I am.  But I have been known on previous occasions to (correctly) recommend buying shares with your ears pinned back.  This is not one of those occasions.