Deluge of Delayed Data
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All of the delayed econ data from the last few months (due to government shutdown) was released last week. The main headline was that payrolls declined -105K in Oct, before rebounding to +64K in Nov. The Oct decline was driven by DOGE cuts and the shutdown, rendering it somewhat stale.
If we cherry-pick a bit, private (corporate) payrolls were up in both Oct and Nov. That suggests things are a bit more resilient away from the public sector noise. We can see in the chart below that nearly all of the job losses have been due to federal workers:
At the same time, overall unemployment rate hit 4.6%, two ticks above the prior level of 4.4%. It’s obvious the job market is slowing down; everyone has known for over a year now. The real question is how fast?
Earlier this year, Treasury Secretary Scott Bessent spoke about “detoxing” the economy from an overreliance on government spending. That’s why we’re seeing a decline in Federal jobs and why the labor market appears weak.
We think there’s a sweet spot where unemployment slowly grinds higher (due to re-entrants to the labor market, government detox, and AI-driven layoffs) but does not explode. That allows the Fed to cut rates more aggressively without the economy entering a recession. Everyone is calling for a recession, but remember that historical models have not worked well because of distortions to labor supply; these are unprecedented times.
Lastly, we leave this chart here as an open question: If the labor market is collapsing like so many economists think it is, why are temp jobs and overtime hours rising? These workers are the first to be let go entering a recession, and the first to be hired coming out of one:
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