“Heard on the Street: A top recruiter in the tech sphere told me he’s having the hardest time in over a decade finding jobs for those laid off in the sector.”

    The above quote is from Leonard Steinberg’s Compass blog yesterday.

    I am sharing it because I have been reading and hearing similar statements for the last six months. But, we nonetheless kept getting strong jobs reports from the Bureau of Labor Statistics (BLS) which would invariably push rates higher and higher.

    Every time we got a strong BLS jobs report, macro analysts would surface on social media everywhere saying… whaaaaat….? And they would just shred the entire BLS report. But rates would still rise.

    Jeff Snider and Steven Van Metre were posting videos every month in fact, quite literally laughing at the BLS data because they would find so many holes in it and it almost seemed ridiculous to them.

    Labor Hoarding – Coming to an End?

    They also reminded us over and over that “labor hoarding” was taking place, where employers retain employees at all costs, hoping for better times to return, because employees are so expensive to train.

    Snider and Van Metre would then point out how manufacturing numbers were slowing, how inventories were building, how much of the manufacturing work being done today is just filling backlog orders and not new orders, how the service sector always follows the manufacturing sector, and how slow overseas markets impact every market. And they’d then say… just wait… we will see cracks in the labor market for sure and rates will fall.

    And today proved them right, as there is simply no way the BLS can show rosy jobs data forever.

    Unemployment climbed to 3.9% from 3.8% and the number of job creations came in below expectations.

    Some media sources and the current administration are trying to spin the sheer number of job creations as a huge positive, but the market knows otherwise and rates fell sharply (the 10 Year Treasury is now around 4.5%, a far cry from the “terrifying” 5.0%+ everyone was predicting a few weeks ago).

    When people give up looking for a job and leave the labor force, they are no longer counted in the unemployment data. If we did include those people though, the unemployment rate would have climbed even higher as 201,000 people left the labor force in October.

    Other concerns include a drop in average hours worked, the increasing number of multiple job holders (just to make ends meet), and stagnant wages (particularly concerning in the face of inflation).

    Won’t Last – No Straight Lines and Profit-Taking

    As a quick warning, today’s fall in rates is indicative of the overall trend but it will likely not last. This is because rates never move in a straight line, as I remind readers often (rates ALWAYS bounce up and down). In addition, rates could very well bounce up today even as traders “take profits” or sell off bonds to take advantage of today’s higher bond prices.

    But overall, this is very likely the beginning of a trend for lower rates. How low they will ultimately go is anyone’s guess, and how long they will stay low is an even bigger guess – but they will very likely drop further over the next several months and into 2024.

    After 2024 though, all hell could break loose on the rate front, depending on what the government does on the spending and borrowing front. We could easily see inflation in the double digits with interest rates in the same range for years – but that is a topic for another blog.

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