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A Very Average Jobs Report

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According to the BLS, the economy added 428k jobs in April. This exactly matched the March number after it was revised down by 3k. The unemployment rate stayed flat at 3.6%. The Labor Force Participation rate dropped from 62.4% to 62.2%. YoY, this April is up 165k jobs compared to last April.

Figure: 1 Change by sector

Looking at the raw numbers, the MoM gain is nearly 300k but up only about 20k when compared to last year.

Figure: 2 Monthly Non-Seasonally Adjusted

Comparing the adjusted data to non-adjusted shows that this April saw the smallest adjustment down in 10 years (backline). The spike down in 2020 is tied into the massive job losses seen in early Covid lockdowns. The adjustment down was 800k in 2020 compared to only 580k this year.

In fact, most years saw an adjustment down of around 800k in April. A similar adjustment for this April would have printed a jobs number closer to 200k. That would have registered the weakest job report since Dec 2020.

On a raw basis, this April was middle of the pack compared to the last 10 years. On an adjusted basis, this is the strongest April over the same time span by more than 100k.

Figure: 4 YoY Adjusted vs Non-Adjusted

Breaking Down the Adjusted Numbers

Looking at the raw numbers is interesting and shows how much the BLS models modify the final output. That being said, the market at large and this analysis will focus primarily on the officially published numbers.

The chart below compares the current month with the 12-month average. Exactly half the categories are above the 12-month trend.

Figure: 5 Current vs TTM

The table below shows a detailed breakdown of the numbers. Similar to the 12-month trend, the current month is also mixed against the 3-month trend with 6 categories above the average. Unfortunately, the categories trailing the 12-month trend are behind by a much larger number than the other categories are ahead:

  • Leisure and Hospitality is 51% below the 12-month trend (82.5k)
  • Prof Business is 59% below the 12-month trend (59k)

In comparison – the categories above trend are:

  • Financial is 116% above trend but only 19k
  • Manufacturing is up 34% but only 14k jobs

One other notable item is the collapse in Construction. Only 2k jobs were added in April which is 90% below the 12-month trend.

Figure: 6 Labor Market Detail


Revisions have moderated some after massive revisions over the last few months. From Jan-Mar, jobs have been revised up by an average of 23k per month. In the analysis last month, this figure stood at 166k per month. Revisions are now much closer to the 3-year average of 27.6k per month.

Figure: 7 Revisions

Historical Perspective

The chart below shows data going back to 1955. As the labor force has grown in total aggregate numbers, the recessions along the way have caused dips in the general trend. But the trend is still clearly upward.

The Covid recession can be seen as the greatest job market loss. The chart also shows how the rebound has been quite strong. The job market had 152.5M people pre Covid and now sits at 151.3M. The job market is still 1.2M people short, but this is up from being over 7M people short last April.

Will the job market hit pre-Covid levels before the next recession sets in? At current rates, that could happen by July. However, it’s possible the economy could roll over before that happens.

Figure: 8 Historical Labor Market

The distribution of the workforce has changed significantly over the last 65+ years. For example, in 1955, manufacturing accounted for 30% of jobs vs 8.4% today. Education/Health Care has tripled from 5% to 16%.

Although the unemployment rate has been sharply falling over the last year (chart above), the labor force participation (62.2%) is still below pre-pandemic levels (63.4%) and much lower than the 66% pre-financial crisis.

Figure: 9 Labor Market Distribution

What it means for Gold and Silver

The job market does appear to be in full recovery mode, but this could be derailed. There are a few things to watch in the months ahead. A lot of companies, especially in tech, pay their employees with stock. This has been a massive tailwind for the last ten years as rising stock prices have taken care of giving raises. With stock markets unraveling, this tailwind could become a major headwind as employees see their incomes fall with the stock market. Employees will have to liquidate more stock to afford their cost of living. This could become a vicious cycle.

The next risk lies in the BLS adjustments. The models have been re-calibrated with Covid data which showed immense weakness in March and April 2020. The downward adjustments in future months could be much greater than historical averages. This could paint a much weaker job market in the months ahead and potentially halt the Feds’ “aggressive” plans.

When the Fed pivots, the stock market will likely rally, but the dollar could face its ultimate test. Confidence in the Fed has been eroding over the last year. A turnaround in policy during high inflation could finally destroy the market’s belief that the Fed is capable of acting the same way it did under Volker. When that inevitably happens, gold and silver could explode higher!

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