June 5, 2023 | ECRI: Market “O-Shit” Moment Yet To Come

BLS estimates (notoriously revised after the fact) boosted the May US job report more than anticipated last week. Under the hood, the actual average work week contracted to 34.3 hours and is back to January 2020 levels. If this contraction is factored into the numbers, Friday’s payroll number was negative 140,000 jobs, not the positive 339k estimate reported. Tellingly, the number of unemployed people rose by 440,000. At the same time, the labour force participation rate for prime working-age people rose to 83.4% from 82.6% a year ago–this denotes the highest supply of labour for this critical cohort since January 2007 (Rosenberg Research). At that point in the last cycle, the Fed had already ended its tightening moves six months earlier in July 2006. They were back to cutting by September 2007, and the stock market bottomed 18 months later, in March 2009.

Today’s guest, Lakshman Achuthan, co-founded the Economic Cycle Research Institute specifically to identify these key turning points for investors. Which key turning points are in play right now? And how can we best take advantage of them? Here is a direct video link.

Also, see Get Ready For the Full Employment Recession; here’s a taste:

Labor productivity fell 2.1% in the first quarter from the fourth at an annual rate, and was down 0.8% in the first quarter from a year earlier, the Labor Department said Thursday. That is the fifth-straight quarter of negative year-over-year productivity growth—the longest such run since records began in 1948.

Those calculations are derived from gross domestic product, which shows output rising at a 1.3% annualized rate in the first quarter. But another key measure—gross domestic income—declined, implying an even bigger productivity collapse.

GDI is the yin to GDP’s yang, measuring incomes earned in wages and profits, while GDP tallies up purchases of goods and services produced. In theory, the two should be equal, since someone’s spending is another’s income.

They never exactly match because of statistical challenges. Lately, though, the divergence is dramatic. “Over the past two quarters, real GDP shows the economy expanding by 1.0%, not far off potential growth, whereas GDI shows it contracting by 1.4%, which amounts to a decent-sized recession,” said Paul Ashworth, chief U.S. economist at Capital Economics. The divergence is ominous: GDI previously undershot GDP dramatically during the 2007-09 financial crisis and in the early 1990s recession, Ashworth said.

Danielle Park June 5th, 2023

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One Comment

• Darren says:

  June 5, 2023 at 9:46 pm

  Nose bleeds and being scared of heights is why most wont make it to the top of K2. It is easy to be bearish anyone can do it. Being bearish is the biggest mistake investors continue to make snort

  Reply