Contact us
CALL US NOW 1-888-GOLD-160
(1-888-465-3160)

Jobs Analysis: What if Leisure and Hospitality has Fully Recovered?

  by    0   0

November was the weakest jobs report of the year, coming in at a paltry 210,000, missing consensus expectations of 573,000. There were modest revisions upwards over the last two months of 8,000 and 15,000 for September and October respectively. Nothing to be excited about.

Figure: 1 Change by sector

This next chart compares the current month with the trailing 12-month average. A few key takeaways:

  • Construction, Professional Business, and Manufacturing were above trend
    • Construction, in particular, was almost triple the TTM (31k vs 12k)
  • The other 5 categories were all below trend
    • Government saw another month of job losses
    • Leisure Hospitality fell WAY below trend (23k vs 222k)

Figure: 2 Current vs TTM

Why was Leisure and Hospitality so low? Last month, the number was 164k. The new Omicron variant is not impacting these figures as that only just surfaced. What if the recovery is nearly complete for L&H? In Feb 2020, there were 16.9M People employed in the sector. As of this month, that sector has 15.6M, still short by more than 1.3M jobs.

The broader economy had 152.5M people employed as of Feb 2020 and now only has 148.6M. Leisure and Hospitality make up 33% of the total job losses still outstanding. If Leisure and Hospitality are reaching a new equilibrium of full employment then which other category can make up the difference? Even worse, if Omicron results in shutdowns then L&H could see more job losses in the months ahead.

What does this mean for the Fed if their baseline for the job market is Feb 2020? How can they ramp down tapering and raise interest rates if their employment mandate has not yet been met? Obviously, based on the inflation numbers, it’s clear the Fed’s dual mandate should be prompting tighter monetary policy. It is dragging its feet for obvious mathematical reasons. Can it use the weak jobs numbers to justify continued stimulus?

Getting back into the data, the table below gives a much more detailed breakdown of the numbers and the entire labor force. Some key takeaways:

  • Every category outside the government sector was below the three-month average
    • This includes Professional Services, Construction, and Manufacturing which were all above the TTM
  • The current month was less than half the TTM Average (210k vs 483k)
  • The three-month average in Leisure and Hospitality is 100k vs TTM of 162k. This supports the idea that this month was not a one-off and growth in Leisure Hospitality is slowing.

Figure: 3 Labor Market Detail

Revisions

This data is subject to revisions as new data becomes available. While the headline release gets a ton of market attention, the revisions get far less. The table below shows the impact of the revisions over different time periods. Please note this is as of the prior month since the most recent month has not seen any revisions. Important items to note:

  • Leisure and Hospitality have been revised upwards by 111k over the previous 3 months. While this upward revision trend may continue, can it be enough to overcome the big slowdown seen recently?
  • Professional Business has seen massive upward revisions of 137k
    • In normal times 137k could represent the entire employment report

These revisions are quite large by any standard. In normal times, most job gains come in around 180k-220k which is nearly the size of the three-month average in revisions.

Figure: 4 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 much work the labor market still requires to regain the employment level seen before Covid (top far right drawdown). As mentioned above, the job market had 152M people. That number currently sits at 148M. The job market is still 4M people short. At 200k a month, it would take almost two more years for the market to recover to pre-pandemic levels. Never mind the natural growth of employment typically seen in the economy.

In the latest period, the unemployment rate fell sharply from 4.6% to 4.2% (it was 3.5% pre-Covid). This occurred even as labor force participation increased from 61.6% to 61.8% (Figure 4).

Figure: 5 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 (61.8%) is still well below pre-pandemic levels (63.4%) and much lower than the 66% pre-financial crisis. The current trend has flatlined.

Figure: 6 Labor Market Distribution

What it means for Gold and Silver

Gold and silver have been hammered recently. In last month’s jobs analysis, gold showed a lot of strength in the face of a strong jobs number. It finally broke through $1800 and charged up to $1879 on hot inflation data. Unfortunately, weak-handed traders bailed when Powell was renominated. Still, a baffling move considering Powell has led the Fed to the greatest expansion of the money supply ever.

Today, gold is up but the move does not match the weakness in the report. Similar to last month where the sellers seemed exhausted, it could be possible the buyers are currently exhausted (for now). They will be back though. Currently, sentiment is still bearish, especially with a Fed that has become just a touch more hawkish in their rhetoric. This despite their actions not matching up to their words, as seen in a balance sheet that grew $126B in November.

Stepping away from the daily price moves shows a more concerning trend. As mentioned above, what if the job recovery is mostly over? The economy is still well short of full employment despite a rate nearing 4.0%. How hawkish can the Fed get into a weakening economy? How many rate hikes can the market handle before the bubble finally pops? Not many! The Fed hasn’t even stepped away, but they will be back aggressively printing if the job market shows further weakness. Gold and silver offer the protection needed against the irresponsibility on display at the Eccles Building.

Data Source: https://fred.stlouisfed.org/series/PAYEMS and also series CIVPART

Data Updated: Monthly on the first Friday of the month

Last Updated: Nov 2021

Interactive charts and graphs can always be found on the Exploring Finance dashboard: https://exploringfinance.shinyapps.io/USDebt/

Download SchiffGold's 401k IRA Rollover Free Report

Get Peter Schiff’s key gold headlines in your inbox every week – click here – for a free subscription to his exclusive weekly email updates.
Interested in learning how to buy gold and buy silver?
Call 1-888-GOLD-160 and speak with a Precious Metals Specialist today!

Related Posts

Fed Has $48B Loss in November and Sees Massive Balance Sheet Reduction

Breaking Down the Balance Sheet The Fed has a targeted balance sheet reduction of $95B a month. Up until this point, the Fed had failed to reach its target almost every month since QT began. In the latest month, the Fed made up for their recent shortfall with a big balance sheet reduction of $139B, exceeding their target […]

READ MORE →

Jobs Report: Not Strong Enough to Prevent a Soft Pivot

According to the BLS, the economy added 263k jobs in November with a modest revision up in October from 261k to 284k but a revision down in September from 365k to 269k. October was a beat against median expectations of 200k. The employment rate (black line) stayed flat at 3.7% while the labor force participation ticked […]

READ MORE →

Comex Results: Why Is December So Quiet?

While the data this month looks weak, I think there is more to the story. My hypothesis is speculative in nature, so I will save it for the end after going through the data.

READ MORE →

Money Supply Growth Rate Sees an Epic Divergence from Previous Years

Seasonally Adjusted Money Supply in October was negative for a third consecutive month, coming in at -$88B. This came on the heels of the largest drop in Money Supply ever last month.

READ MORE →

Comex Update: The Gold Shorts are Delaying Delivery

Slowly but surely, physical supplies of gold and silver are being drained from the Comex. This has put pressure on the system. We are now seeing that pressure manifest itself in the data.

READ MORE →

Comments are closed.

Call Now