Welcome to Arkansas! Formerly the Land of Opportunity, the Natural State is your one-stop shop for novaculite. Novaculite is derived from the Latin novacula, meaning a sharp knife, dagger, or razor, in reference to its sharpening applicability. Also called whetstone, if you have a few dull blades laying around, this is the geologic product for you. Those in the know, know these microcrystalline rock types used to produce sharpening stones commonly come in white, gray, or black. Novaculite beds are quarried in the Ouachita Mountains of Arkansas (and Oklahoma as well as the Marathon Uplift and Solitario regions of Texas). The stone is very resistant to erosion, making it an optimum choice for honing. Outside the United States, novaculite also can be sourced in Japan and parts of the Middle East. As any caveman can attest, because novaculite is a very hard, dense substance, it’s been mined since prehistoric times. One of its first uses was to fabricate arrow and spear points.
While polishing skills in the dry science requires constant excavation, a broader panorama is called for to take in equally burrowed nuances. The richest tappable veins amidst a prolonged inflection are earthed deep within labor market data. Each Thursday morning, market participants tune into weekly jobless claims. Given the Federal Reserve’s nominal narrative holds that persistently low unemployment trends validate its High for Longer stance, credit and equity strategists must keep this leading indicator high on their dashboards. Though a point of frustration for countless witnesses of an accelerating layoff cycle, the fact remains that sustained levels in the low 200,000s optically characterize a job market that remains too tight.
We’d be willfully obtuse if this is where our analysis ended. Especially in the current cycle, it’s risky to be resigned to unemployment being a lagging indicator. To be sure, the unemployment rate historically peaks after recession, when the economy is in a recovery mode. But before recession, unemployment’s trough point can arrive well before a definitive rise in in the book. In the current episode, the unemployment rate bottomed at 3.4% in April 2023.
Cutting edge intelligence on layoffs must be hewn outside the isolated orbit of the Department of Labor. One of Danielle’s favorite exercises when she was inside the Fed was introducing unorthodox, unproven and, most importantly, data sources that were so youthful they defied seasonal adjustment. If you could have seen the look of horror the first time she shared Challenger, Gray & Christmas’ (CG&C) then-nascent Hirings series.
In keeping with the tradition, MacroEdge’s job cuts tracker has caught our eye. Its very limited history provides an aggregate of public job cuts from four sources: DailyJobCuts.com, state WARN notices, TrueUp and Google News. Since MacroEdge data commenced just last September, it’s best to put it up against a what’s now an old saw – CG&C’s Job Cut Announcement data. On an apples-to-apples basis, MacroEdge has fared well. The first test, at the turn of the year, arrived in January with MacroEdge jumping north of the 100,000-mark, from lower levels in the fall (blue bars). Challenger data (red line) followed suit.
Though MacroEdge’s website tallies to 42,193 through February 21st, the firm’s founder foresees a higher final count: “Cuts have slowed a bit in the second half of this month, but we are still expecting 60,000 to 70,000 this month, which is high. March has a lot of interesting earnings reporting that could see yet another (historically) elevated month.”
With Nvidia fireworks as cover, Buzzfeed, Rivian and Veritone, ironically an AI software and solutions provider, released news they were pursuing job cuts. Layoff announcements are naturally leading — it takes time to dislocate the worker from the job count. Moreover, since 2022, billions in severance pay to white-collar workers has widened the wedge between the Bureau of Labor Statistics’ Establishment and Household surveys. Nonfarm payrolls are underreported as employers continue to count severance workers as being on the payroll.
Google Trends helps to close the divide. In the last two years, “laid off” search interest has plateaued at a high level. After spiking to a local peak of 76 in January 2023 (orange line), a subsequent fade has been displaced by this January’s and February’s recapturing 63 and 68, respectively. Providing corroboration is DailyJobCuts.com’s per diem layoff count, which soared in January 2023 and has revved back up this year (purple line). The February divergence, with Google Trends up and DailyJobCuts down, suggests more announcements will be forthcoming.
Because the U.S. job market hasn’t created a full-time job in nearly a year, it’s critical to track those who don’t qualify for jobless benefits through the lens of contract workers. The weekly American Staffing Association (ASA) staffing index previews more than temp payrolls; it captures the holistic cadence of the unemployment cycle. Flipping ASA on its head (aqua line) yields an unequivocal conclusion: the official unemployment rate is heading upwards (lilac line).
Closings, especially of small businesses, are also not fully depicted in jobless claims. DailyJobCuts.com’s sister Closings data show distressingly consistent growth since mid-2023 (green bars). Higher highs and higher lows gel with the continued grind higher in continuing claims. While the media cite the seasonally adjusted series (yellow line), it’s no coincidence that raw, not seasonally adjusted, continuing claims (blue line) make for a better fit. It’s just like us to point out less-than-sharp modeling endemic to U.S. statistical bureaucrats.