Good Friday AM,

U.S. payrolls grew by 150,000 in October and the jobless rate rose to the highest level since January 2022.

Bonds are having a great week. The 10-yr is at 4.51% and heading lower (fingers crossed). Not so much for Ex NAR CEO Bob Goldberg who resigned today presumably over the loss in the commissions battle.

Before I get into the jobs data which is important and lengthy (all be it an easy read courtesy of the WSJ), two other quick hits:

According to Redfin, the median luxury sale price (luxury defined as top 5% of the market) during the third quarter of 2023 rose 9% year-over-year to $1.1 million, nearly three times the annual jump for nonluxury homes, where the median price rose 3.3% to $340,000. While luxury home sales during the third quarter were still down 10.6% compared with the same period last year, sales of nonluxury homes fared worse, dropping 17% year-over-year.

And why I am convinced that retail sales are about to fall…

23Q3 GDP was up 4.9% on an annualized basis with 2.7 percentage points of the increase due to very strong consumer spending. This looks unsustainable because real disposable income has fallen four straight months. That said, spending is strong partly because savings have fallen from an already low 4.9% of disposable income in June, to 4.1% in July, 4% in August, and 3.4% in September. Pre-Covid it was 7.5%.

Ok back to our regularly scheduled info on details within the jobs report..

Unemployment Flashes Worrisome Sign

A rule of thumb says when the unemployment rate rises half a percentage point, the economy ends up in a recession. Thus, its increase to 3.9% in October from 3.8% in September and April’s 3.4% low looks worrisome. Versions of this rule popularized by Goldman Sachs and economist Claudia Sahm use smoothed data that do not yet signal recession. Moreover, payrolls and output have been strong, contradicting the recession signal. Still, there are warning signs. First, most payroll growth has been in “backfill” sectors—retail, leisure, hospitality, health, education, social services, and government—trying to fill persistent pandemic-era vacancies. Excluding them, payrolls rose just 21,900 or 54,900 adjusted for the auto workers’ strike. And while monthly payroll growth averaged 204,000 over the last three months, the separate survey of households shows employment contracting 13,000 per month. Adjusting household data to match the payroll definition of employment yields a gain of just 103,000 a month—half the payroll pace.

Weaker Wage Gains

Wage growth cooled as employers hired less. Average hourly earnings rose 0.2% from a month earlier and 4.1% from a year earlier, down from 4.3% in September. In the last three months, they rose just 3.2% annualized. This has been a key metric for the Federal Reserve: When wages rise rapidly, in theory, it forces businesses to increase their prices to pay for higher labor costs. Wages growing 3% to 3.5% would likely be consistent with the Fed’s 2% inflation target. Cooler hiring and rising unemployment alongside a downward trend for wages could bring the Fed’s historic interest-rate increases to an end.

Dropping Out

The unemployment rate, while still historically low, rose to the highest level since the start of 2022. The underlying numbers were disappointing: The number of unemployed rose and the labor force shrank as more people stopped looking for work.

Labor-force participation fell for both the overall population and so-called prime-age workers. The age 25-54 cohort had seen especially strong participation–running at a two-decade high in recent months–before October’s setback.

The number of permanent job losers was also the highest since January 2022 and above its immediate prepandemic average.

That really should be enough for today…

Please remain safe and healthy, enjoy the weekend and first, make today great!