True story. At my first hockey game, I dropped a glove under my seat. Awkwardly rooting around for it when the official dropped the puck to begin play, I popped up to see two players in a brutal brawl. Circa 1997, a year after moving to New York from UT Austin with an MBA in finance, in DLJ’s front-row Madison Square Garden seats, I asked the hockey fan client I was entertaining: “Whoever wins the fight gets the puck first?” On Saturday, my middle son and I boarded New Jersey Transit from Penn Station to catch a New York Rangers game, which was great until sudden death took down the only team I’ve followed since the amazing gaffe. A question lingered: How had the PC police allowed any team to be called the “Devils”? Per PucksAndPitchForks.com, it’s legit Garden State history: “The Jersey Devil is a monstrous winged (with) hoofed feet, a horse-like head, and a pointed tail. (It) lurks in the Pine Barrens—a region of more than one million square acres of dense pine forests that comprises 22% of New Jersey’s land area.”
Would you believe Jersey Devil sightings continue to this day, albeit with less frequency than the 19th century? The same cannot be said of Goldilocks sightings, which abound across the sell side and are furiously documented in the financial media. Of course, cheerleading Bloomberg was out front over the weekend with, “Optimism Makes Comeback on Wall Street with Soft Landing Eyed.” It all comes down to the resiliency of the U.S. consumer and disinflation beginning to win the price pressure footrace. Unfortunately, Federal Reserve chair Jerome Powell hasn’t switched up his game plan for the new year. Rip-your-head-off-rallies in risky assets coupled with a half-century low in the unemployment rate remain the perfect backdrop against which to maintain tight monetary policy. In the background, Quantitative Tightening (QT) will keep pushing what had been unprecedented flatlining in November money growth being reported as negative when December’s lagged data hit.
Nary you mind, investors determined Friday. Tight policy, including QT, will soon enough be extinguished. It’s not just any old inflation that’s coming down, we’re talking about declining wage inflation, as evidenced by falling wage growth amplified by a shrinking workweek. As if that wasn’t enough “bad is good” news, fresh data on the service sector is unequivocally recessionary (unless it’s different this time). With that, the beaten down Nasdaq tacked on a neat 2.6% gain on Friday. We’re super sure Powell will highlight this as reason to swing dovish come 9 am ET tomorrow, when he’s set to speak in Sweden!
Exclamation points aside, Friday’s jobs data will give the “real” Powell pause, but more importantly, plenty of cover to perturb the Pivoteers (see 3.5% unemployment rate). In the meantime, we noted several trends beginning with the fast-dwindling ranks of temporary workers. Not only has the aggregate five-month temp job loss been steeper than that of the prior four recessions, revisions show an acceleration in the pace at which companies are jettisoning ‘Last In, First Out’ workers (top left chart). Of the 28,000 downward revisions to October and November, 29,000 were temps. Data via the American Staffing Association (green bars) corroborate the quickening.
In keeping with ‘hours before bodies,’ I was tickled by “weather” being thrown out to explain away the decline to a five-year low in the labor-force-wide workweek. Except for Christmas Day, planes were fuller on every other day this past December than they were in 2021. Just to be sure it wasn’t Mother Nature, we dissected the workweek three ways (upper middle chart). At 33.3, the service workweek is exactly where it averaged in the four years through December 2019. The stimulus-check-spurred spending was the only thing to dislodge it from trend, to January 2021’s 33.9-hour peak. Last month was simply a reversion to the mean.
The goods-producing sector is another story. In February 2020, its workweek was 40.3 hours. It hit a post-pandemic high of 40.4 hours last February and has since tumbled to 39.7, the lowest since January 2011, when the U.S. was recovering from the Great Recession. As for the self-employed, their workweek entered the pandemic at 36.0 weeks. As the U.S. economy oligopolized, this metric has sadly descended from a record high of 42.9 in April 1977. The shutdown months and reopening noise notwithstanding, December’s 34.0 hours is a pre-pandemic record low.
If you can stand it, reread that last paragraph. The two takeaways are critical: 1) Despite the supply chain disaster, we’ve not seen a manufacturing renaissance. 2) Business creation was not induced in the pandemic’s aftermath. To beat a dead horse, per DailyJobCuts.com, at 87 in January’s first week, business closings are a third of December’s total, which itself was the highest monthly tally since 2009.
Finally, at 26.8 million, part-time worker ranks are at the highest since February 2020, as employers were hunkering down for the plain-vanilla recession the pandemic effectively postponed (light blue line). For context, the number of part-time (19.3 million) and full-time (114.3 million) workers troughed in April 2020, the darkest days of the shutdown. Though 400,000 off May 2022’s peak, at 132.3 million, the number of full-timers in December was still 700,000 higher than October 2019’s pre-pandemic all-time-high of 131.6 million (lilac line). Closing the part-time/full-time gap promises to be more meanly devilish exercise than your typical reversion to the mean.