Friday, December 8, 2017

November Employment Flows

I have been on the lookout for a bit of a contraction because of Fed hawkishness, stalled credit growth, etc.  So far, this has not come about.  Strangely, bank lending seems to have stalled at about the time of the 2016 election, but at the same time, at least initially, the yield curve steepened, which should be a bullish sign, and of course equities have shown healthy growth.

Employment tends to be a lagging indicator, so it isn't necessarily that useful for making tactical cyclical decisions, but in the year since the election, employment flows have also been surprising.  Both in net terms and in gross terms, they have taken bullish turns.

Near the end of 2016, net flows from Unemployment to Employment had been showing weakness, but this has completely reversed, and now net flows from unemployed to employed are back to recovery levels.

And, gross flows were all turning sour in late 2016.  Flows between Employment and "Not in Labor Force" had started to decline in both directions, which is bearish.  And flows between Unemployed and "Not in Labor Force" and Unemployed and Employed had both stopped declining, which also tends to happen during contractions.  But, these flows have also reverted to bullish trends.

Go figure.

The Fed seems intent on sucking cash out of the economy while the CFPB continues to enforce capital repression on working class home buyers.  Yet, there appears to be some loosening of credit, possibly simply from the continued rebuilding of equity, and low-end housing is finally recovering at a rate similar to high-end homes.  There is a lot of catching up to do there, though, if we will ever stand for it.  Are there enough tailwinds to keep this thing going?  I hope.  With so many contradictions, it's tough to be a speculator in this context, though.

1 comment:

  1. Nice post. China, Japan and Europe growing, all below inflation targets. That might offset Fed's asphyxiation efforts.