Number of unemployed persons per job opening
bls.gov
bls.gov
Look at how (relatively) low it was in September 2007. One can assume in February it was even lower - and February is when Greenspan said a recession was obviously coming. The subprime mortgage crisis started in April 2007. But the job market didn't really get fucked until 2008. There's a delay with these types of things - I personally predict that a year from now, a lot of companies (especially ones in the tech sector fueled by immense amounts of cheap debt and the assumption ad revenue always goes up) will collapse. That's when you see the spike in unemployment, not now.
I argue that the US fed rate is going to have to get a lot higher than 4% to cause this boom to bust in the US. That's an exercise in fed tea leaf reading. The last fed guidance was a lot more ambiguous than previous tightenings this year.
"The percentage of adjustable-rate mortgages to total loans shrank from a high of roughly 34% in 2005 to a low of under 5% in 2022. The decline began when the housing market peaked around 2006 and bottomed in 2009 at around 2.5%."
https://www.financialsamurai.com/adjustable-rate-mortgages-a...
Everyone is always fighting the last war. The real estate market may slow down here, maybe even prices decline in either real or nominal terms, but I don't think real estate is where the biggest risks lay, at least in the domestic US real estate market (can't say anything for China or AUS or other markets that seem primed for a dramatic bust).
I'm far more concerned about sovereign debt levels, which have absolutely ballooned over the past decade, and are even accelerating in growth in many cases.
That rent prices haven't massively dislocated from housing prices makes me think it's not the same situation.
I think this will unfold quicker than that. We’ve had artificially low interest rates (+ QE) for over a decade now. There’s lots and lots of economic activity that will not be profitable when rates go up. If we’ll have ~5% rates in February (as Powell indicates) then I think we’ll see massive deterioration in the labor market before summer.
Given that one would likely lead to awful financial contractions and instability... and the other doesn't, seems like there is a preferred option - artificiality aside.
Frankly, I'm tired of the interest rate hammer falling on workers. I find it especially unacceptable when the Fed is jacking rates to reign in wild corporate spending and investor speculation.
Again, everyone has been begging congress for better tools but they choose inaction until the Fed is forced to use the one tool they have.
I see this round as the Fed quickly trying to get things under control when they have safe harbor with Biden. Given a Trump/Republican administration again I expect the gloves to come off when they demand cheap debt for the investor class under the guise of helping workers. Magically, the Republicans know how to fix the economy (until it explodes and it's Binden's fault), or so goes the trope.
Whats the proof behind this speculation?
>“I have the right to do that or the right to remove him as chairman,” Trump said Saturday at a news conference called to provide an update on the administration’s response to the coronavirus outbreak. “He has, so far, made a lot of bad decisions, in my opinion.”
https://apnews.com/article/business-politics-donald-trump-vi...
So there is no proof that Powell made fed policy based on saving his own job?
I'm not commenting on president Trump's comments or Powell's response to them. Just pointing out that we should expect Powell to align with the executive and that doing so is not "political pressure," it's just normal.
No, you misunderstand the situation. We had artificially high interest rates for at least the period from late 2008 to about 2014 -- if we assume the Taylor Rule is "the natural rate", as Taylor originally defined it in 1993, as the rate that allows the maximum possible employment balanced with just 2% inflation. For most of the period 2008-2014, that would have implied a rate of negative 5% interest, but banks cannot go much below 0%, so they were up against the zero lower bound, and so the rate was artificially high -- it was stuck at 0% when the economy needed it to fall to negative 5%, so as the restore what maximum employment could be achieved against the limit of 2% inflation.
(Taylor himself later modified the Taylor Rule in response to feedback from Republicans, a story you can grasp from this: https://delong.typepad.com/sdj/2009/12/on-the-definition-of-... )
But all this is a bit beside the point as I see it. If you run the economy on negative real interest rates for an extended period of time you will see seemingly profitable economic activity that in fact destroys economic value (but does so slower than the negative real interest rate). When rates go up such activities will reveal themselves as unprofitable.
I don't know, your comment makes little sense to me. I encourage others to read what Greenspan actually said if they are under the impression that he predicted the 2008 recession.
Where do you get this idea from? Especially since the Fed has said over and over that they are going to do exactly that.
You should really listen to him rather than your own ideas about what the CPI is going to do.
The job market didn't just magically "get fucked". Companies found themselves with little cash and no access to credit. We had the biggest credit freeze since the Great Depression. The Fed is not making that mistake again, and the corporate world is absolutely loaded with cash right now.
...Is it? Or is it loaded with debt masquerading as cash?
It is: https://fred.stlouisfed.org/series/QFRTCASHINFUSNO
It started burning down this year, but corporate cash on hand is still the highest it's ever been in history.
This one is already quite odd in a number of ways (i.e., low unemployment), so there's good reason to expect several other aspects of it to not follow conventional wisdom.
My personal opinion is that this will be seen as an indefinite recession, in that we will look back and see that it was comprised of the cause and effect of many smaller "recessionary events" rather than one defining event.
generals are always fighting the last war.
That is likely the wrong prediction.
The thing to be worried about is stuff like commercial real estate and all the vacancies in places like downtown SF and Portland (plus Mall vacancies and everything else--other than self-storage of course).
Those vacancies are currently being floated on cheap debt and rolling that over is going to get much more expensive. But it takes time to push a business into insolvency, so the delay you cite is certainly real.
That can rollover into a financial crisis via CMBS.
I doubt that this recession will be primarily about tech, although it might hit tech harder than 2008 did. I doubt it changes anything fundamentally about the tech sector though other than clearing out some unsustainable companies with high debt-to-equity ratios.
Also, since the recession is being created by rate hikes, there will be plenty of room to cut rates in a recession/deflationary environment. It seems that there could be a natural feedback loop to this.
So the actual number of people who are not working is certainly higher.
https://www.bls.gov/news.release/jolts.nr0.htm
and the technical note link is:
https://www.bls.gov/news.release/jolts.tn.htm
which says
>Employment estimates are benchmarked, or ratio adjusted, monthly to the strike-adjusted employment estimates of the Current Employment Statistics (CES) survey. A ratio of CES to JOLTS employment is used to adjust the levels for all other JOLTS data elements.
We all know U3 has its flaws, but I've never really found a situation where U5 or U6 would make a sizable difference in an argument.
The only people who seem to play U3 vs U5 vs U6 games are those who are jumping statistics between arguments, to mislead and misdirect. IMO anyway. A good arguer always uses U3. When someone else runs out of things to say, they start criticizing U3 itself (ignoring the easily accessible U5 or U6 statistics). So its a good indicator for when a discussion has run its course.
No, a good arguer ignores U3. It's a favored statistic by administrations because it's designed to improve even if circumstances haven't changed. People challenging administrations prefer U5 or U6 because they don't improve even when circumstances haven't changed.
Good arguers ignore all three and use prime-age employment: https://fred.stlouisfed.org/series/LNS12300060
Aha, it's not Universal "have £16,000 or less in money, savings and investments".
As an extreme, the pipeline of Hollywood movie production is an interesting model for working with “the best” people. Most positions aren’t that exclusive, but finding the right people is actually a major concern.
Reality is that after two years no one can really get back in the same job without some sort of bridge trainings for any job. So yes they are still looking. Just not necessarily the same type of job.
That means the graph on the article uses the less useful number. And the GP's notice is relevant.
But maybe that's just me.
That's pretty absolute. There are plenty of people above a certain age who depending on skills, preferences, and savings are in some gray area between working, zero interest in working for pay at all (whether "disgusted" by work or just ready to move on), and will do a little work on the side for the money/human contact/intellectual stimulation etc.
When the headline unemployment rate is the only thing the vast majority of people hear about and what politicians boast about, it's entirely reasonable to remind people that it's common to misunderstand what "unemployment rate" actually means.
Most people do think it's something closer in relation to labor participation rate.
I feel like people love to call the the U-6 the "real" unemployment rate because it looks far worse than it actually is. But, in reality it doesn't matter if your preffered figure feel from 10% to 6% or from 17% to 10% over a time period.
[0] - https://www.bls.gov/news.release/jolts.t04.htm
[1] - https://www.statista.com/chart/26186/number-of-people-quitti...
A better metric could be the number of billable work hours within the last month, or the payroll distribution curve. The latter can be easily computed from the monthly payroll taxes and should show if people are being massively shifted to part-time or laid off and not immediately finding another job.
https://www.macrotrends.net/1377/u6-unemployment-rate
> U6 adds on those workers who are part-time purely for economic reasons
I hate to nitpick but I see this sentiment word-for-word on HN way too much. Uber drivers don't actually operate at a loss unless they only Uber for a short amount of time and they total their car during that stint. They just tend to earn less profit (often way less) than they think they are earning due to the car depreciation and other factors. But a working class person cannot afford to operate "at a loss" without noticing immediately, and a $25,000 car cannot depreciate infinitely.
On the other hand, if the job market is actually that tight, you'd expect employees to have pricing power. (Maybe they do, and it's just taking both workers and management a while to get used to that idea?)
And so cues the debate. Which measures _should_ we focus on? Etc. etc.
The only thing with any certainty, is that I know we'll be retroactively be declared to have been in a recession for months. The NBER is 100% trusted on calling the recession, but they're also always late to the party by several months.
NBER always calls the recession accurately, because they backdate their calls. Ex: in 2008, NBER declared that we've been a recession since 2007.
--------
Because of this effect, everyone wants to be "correct faster than NBER", so you see a whole lot of talking-heads talking about recession way too early (ie: before all the economic indicators prove we're in a recession). Everyone wants to predict the future after all, so that they can feel smarter about the whole situation.
EDIT: It should be noted that in the real world, it takes weeks, maybe months, to collect and process the statistics. That is to say, we won't know how good our economy in October 2022 is, until maybe January of 2023. That's why NBER is late, they need the time to collect statistics and analyze them. But its also why everyone who is trying to call the Recession "as it happens" (IE: call a January Recession in January) is inevitably going to be wrong, because they're baseless and without any actual data backing that sentiment.
Data and statistics take time. Many months. Just sit tight and wait. Have patience. There's no real benefit (or downside) to being "early" or "late" to calling the recession. Getting the call correct is important. It takes many months to spin up employees and/or fire them anyway (good severance pay is multi-month affair after all)
Isn't there a large financial benfit?
Like if you could predict any up/down turns you know when to start buying/shorting stocks. Or even if you're a bank maybe don't lend out a ton of money at say 2% when next month you can lend at 5%.
But the stock market doesn't always go down in a recession. And vice versa, a recession may happen, but the stock market may be fine. Ex: the recession of 1990 barely budged the stock market. While the Stock Market Crash of 1962 had nothing to do with the economy.
> Or even if you're a bank maybe don't lend out a ton of money at say 2% when next month you can lend at 5%.
But that's speculation upon the Fed Rate, which isn't about recessions at all. For example, the Fed Rate increased in from 0% in 2015 to 2% in 2019. Or from 1% in 2004 through 5% in 2006.
First, the NBER is not a government agency. It's a private organization.
Second, there is no law that says that the NBER has the legal authority to declare recessions.
Its you who has to argue why NBER's methodology is wrong.
If I get known to be trustworthy and reliable on a given topic, that’s the authority I’d have, a reputation-based authority, not a legal authority.
For people interested in understanding exactly what the economy does in detail, of course it is more important to get it right than getting it early.
However, for some sets of short-medium-term investors, there could be a very real benefit to calling the trend correctly and early.
I'm quite convinced that what is happening here is what happens to every complex system after a large uncontrolled disturbance - all the subsystems oscillate wildly and often not with the same leading/following indicators. This is just that happening until it gets damped.
I see a key real-time recession indicator as just the level of traffic in the area (I'm north of Boston). Obviously not hard numbers, but quiet vs dense & fast traffic seems to indicate better whether we're going into recession or not. The traffic has only increased since the beginning of the year, and indeed, the last quarter came out as 2%+ growth...
Low unemployment.
High inflation.
High interest rates.
These are the hallmarks of an industrialization. Labor is needed to be more productive. Business wants capital to do it. Lack of labor and productivity results in supply shortages that raise prices, while labor shortages forces salaries to match.
Stocks, looking for dividends, will do poorly because of high pay, labor costs will eat profits and eaten profits will kill stock values, leaving to the appearance of recession.
Individuals will barely scrape by neutral because inflation offsets higher pay
But a good investment that raises productivity will pay very very handsomely in the future.
And those that don't? Will be inflated away to nothing.
Order is being restored to the post 2008 insanity. Many tech companies won't survive the jump.
Not if they are selling the type of labor that is experiencing increase in prices, because:
>Lack of labor and productivity results in supply shortages that raise prices, while labor shortages forces salaries to match.
With war, population shrinking, disruption around the world, I expect productivity (in total) to be somewhat stagnant.
Which means the top dogs will be forced to make less while they figure out how to fix things through productivity going up once the disruptions are over.
But also that the average Joe will get a larger slice of a smaller pie.
Assuming I'm right. Who knows what will actually happen.
Your entire story is backwards.
Now I can't prove this for sure, we will see if I'm wrong or not, but I think this is definitely capital shortage territory, not fed screwing with the rate territory.
Is it not the case in your area that every fast food joint and small business has a "hiring" sign up with a starting wage listed that a lot higher than it was ~3 years ago?
The labor market tends to be tightest before a recession because it forces the Fed to hike until it breaks.
[1] https://www.investopedia.com/ask/answers/what-are-leading-la...
https://fred.stlouisfed.org/series/FEDFUNDS
QT + higher interest rates clearly started in 2015.
QT quite clearly did not start in any meaningful way in 2015.
After the 3rd round of QE in 2014, the Fed began to undo that policy by raising interest rates above 0% in the 2015 to 2016 timeframe. They also were unwinding their balance sheet into 2019, before COVID19 interrupted plans.
Not zero-interest rate policies, low-interest rate policies. You're intentionally misrepresenting the position here.
The 2019 reversal was... well timed for the wrong reasons. Every economist will tell you that these Fed-moves take over a year (!!!) to kick into effect. Since COVID19 occurred in Nov 2019 into March 2020, the 2019 reversal was actually perfectly timed.
For all the wrong reasons mind you, but... we kinda got lucky there.
That is just not true.
But that's because this measures demand for labor, not supply. We are seeing a broad-based depression of economic activity, caused by supply problems, and the supply of labor is one of those problems. We've aged, a lot of boomers retired a bit early at the onset of the pandemic, and there are a lot more people on disability than we once had. The labor force participation rate has never returned to pre-pandemic levels, and even that was low by 21st century standards:
https://www.bls.gov/charts/employment-situation/civilian-lab...
Ominously, most of what world governments have been doing to try to help the economy, has been about goosing demand. In a supply recession, that's like giving an electric blanket and a hot drink to somebody with a dangerously high fever...
And more than a million Americans have died from Covid.
*unfortunately, subsidizing ride shares is probably not a "useful purpose"
It is exceedingly obvious to anyone looking at the trends that there is a simultaneous demand and supply shock going on.
Happy to keep sending graphs until the point is clear.
Look forward to your next attempt.
It's okay, I'll wait.
Except now that Russia and China are showing military ambition, this arrangement is done with, so we truly need more domestic supply. Except now it's a cultural problem: if you give 10 youtubers and 1 baker one extra dollar, the price of bread will go up, but it won't convince a single youtuber to go stand in front of a hot oven all day. We won't fix it by printing more money. We could fix it by destroying easier ways to make money, but it will be painful and will take time.
But thinking we're going to bring lots of jobs for $5 an hour so they can try to afford $3000 of rent per month is just going to get cities burned down in mass.
* The bakers would rather quit than keep earning less that what easier jobs pay, pushing the prices up.
* If the price went too high, someone would setup another bakery to get a market share, pushing the prices down.
With automation and consolidation we have 1 corporation owning 1 automatic bakeries and 10 completely disposable bureaucrats on near-minimum wage. If the demand goes up, jacking up the prices is easier than setting up the 11th bakery (what if the demand goes down later? too risky!). If a new player enters the market, they will just sell the bread in that neighborhood at a loss until the competitor is out, then get the prices back.
Rinse and repeat for a decade and here you go: assets prices are through the roof, salaries are stuck, there is a shortage of everything, prices are going up, competence is lost art, nobody knows what to do.
Artificially created jobs won't pay for a decent house because they don't come with a bargaining power. We could print money and turn $5/hr vs. $3K rent into $50/hr vs. $30K rent, but it won't change the balance of power. If you want to change it, we need to crack down on centralization and make small businesses competitive again.
Because otherwise, that explains nothing about the chart.
A healthy number is between a hundred and a thousand, the number of jobs someone can potentially do (lots of opportunities).
Likewise, at a 10-person company there should be hundreds of jobs that person number 11 could end up doing, corresponding to hundreds of job openings. Anything less than a hundred job openings per person means employers aren't hiring enough.
Imagine meal choices per person: if there are only 2 then it is famine, a hundred to a thousand is healthy. "There are two meal choices per person" is not a bustling metropolis full of restaurants and grocery stores. It sounds more like a food desert.
There are two job openings per person is similar: in a healthy bustling evonomy it should be a hundred.
In reality, the divisor includes college students, the highly disabled, happy housewives/househusbands, trust fund brats and, most importantly, the elderly/retired. Essentially everyone age 16 and over. Not 19, not 21, 16. I.e. it includes juniors and seniors in HS and college students.
The demographic shifts in the US means the labor force participation rate will, by necessity, decline.
The majority of unemployed people are nowhere near qualified, or even able to hold the jobs that are available. Some simply don't have the IQ for it, some have mental issues or other health problems, unable to afford to relocate and some simply aren't cut out for the job market. I have an acquaintance who is basically dependent on unemployment being 0%. He's a nice, interesting and somewhat smart guy, but he don't understand jobs and is unable to hold a job for more than a few months.
It doesn't matter if there are plenty of work, because the pool of people able to fill those positions are way more limited than governments and companies are willing to admit.