Job Market is Cracking in The USA (Uncut) 02-07-2025

Job Market is Cracking in The USA — Further Weakening Expected

In today’s video, we are covering the jobs report and the labor markets. The expectation was that we would add 170,000 jobs. The results came in below expectations.

So for the month of January, the labor market added a net 143,000 jobs and the unemployment rates fell to 4.0%. So here are the monthly figures for the past three years. As you can clearly see, the labor market has been weakening. So the question is whether it’s just normalizing and it’s going to stop here or whether the situation will deteriorate.

So let me know what you think. And here has been the unemployment rate where we currently stand at 4.0%. So keep in mind that the Federal Reserve’s last projection estimates that we’re going to end the year at 4.3% and wage growth came in at 4.1%. Also, there were revisions made for November and December. The report says that the change in employment was revised up by nearly 100,000 jobs.

So they’re saying that the labor market ended stronger than expected in 2024. Now, let me show you the reactions to this jobs report. And we’re going to start with the stock markets.

So yes, the report did miss expectations, but the stock market honestly didn’t care so much. If it were a disaster of a report or phenomenal, then of course we would have seen a stronger reaction. But markets opened, little changed.

So later in the day, markets reacted more strongly to a potential escalation in the trade war. Now the next Federal Reserve meeting takes place on March 19th. After the report’s release, here are the odds of an interest rate cut by the Federal Reserve at that meeting.

There is now a 93.5% chance that the Federal Reserve does not cut interest rates at that meeting. This is up from an 85% chance right before the release of this report. Now, I want to show you the information from the JOLTS report.

But before we do that, I want to show you what Jerome Powell, Chair of the Federal Reserve said, because that gives a good overview of the situation regarding the labor markets. So here’s what Powell said last week. It’s a low hiring environment.

If you have a good job, it’s all good. But if you have to find a job, hiring rates have come down. Now Jerome Powell also said, if there were to be a spike in layoffs, if companies were to start to reduce headcounts, you would see unemployment go up pretty quickly because the hiring rate is quite low.

Okay, so take a look at this. Job openings have declined to 7.6 million. As you can see, job openings have clearly been trending down.

Again, the labor market has been weakening, but the question is, do we stabilize here or does it continue to get worse? So the number of job openings per unemployed person is at 1.1. While job openings have been falling, of course hiring has been on the downtrend as well. And while job openings and hiring have been decreasing, the number of layoffs has been increasing for the past three years. And naturally, because the labor market is not booming, many people are staying put and not moving around as much.

The number of quits has been falling. So I think that gives you a good summary of the labor markets. Now if you want my opinion, I mean, I don’t want to be negative, but then again, I don’t want to be disingenuous with you either.

So my opinion is that the labor market will continue to weaken. So here’s why, and I’m just going to speak honestly. Sadly, and this is truly sad, even with the Fed Fund’s interest rate at 4.5%, that is too high for our environments.

Which is why the Federal Reserve is expected to lower interest rates this year, but of course not at this upcoming meeting. Compared to the long-term average, 4.5% is not that high. But compared to five years ago, 10 years ago, 15 years ago, 4.5% is extremely high.

So we’re basically in a situation where we’ve become accustomed to cheap and easy money. Another thing is that government hiring has been propping up these numbers. Government hiring is usually in the top three sectors of jobs added.

And from what it appears, those numbers may no longer be so robust. And listen, as many of you probably know, I am not the biggest fan of the Federal Reserve, but even they are projecting that the unemployment rates will be higher by year’s end at 4.3%. So many times I disagreed with the Federal Reserve. However, in this instance, I’m going to be in agreement.

But let me know what you think. I look forward to reading your comments. Please subscribe.

I thank you for the support and wish you a very nice day. Take care.