WARNING: The Jobs Data is COOKED

Recent Jobs Data Analysis & Market Implications

Key Concepts:

• Unemployment Rate: The percentage of the labor force that is actively looking for work but is unable to find employment.
• Labor Force Participation Rate: The percentage of the civilian noninstitutional population that is either employed or actively seeking employment.
• U6 Unemployment Rate: A broader measure of unemployment that includes marginally attached workers and those employed part-time for economic reasons.
• 10-2 Year Treasury Yield Spread: The difference in yield between the 10-year and 2-year U.S. Treasury bonds, often used as an indicator of economic expectations. An increasing spread can signal anticipation of economic slowdown and potential Fed rate cuts.
• SOM Rule: (Specific Outcome Measure Rule - contextually refers to a potential trigger for market reactions based on economic data)
• POMO/TOMO: (Permanent/Temporary Open Market Operations - tools used by the Federal Reserve to manage liquidity in the financial system)
• ADP Data: (Automated Data Processing - a monthly report on private sector employment, often used as a precursor to the official jobs report)
• Wage-Price Spiral: A macroeconomic phenomenon where rising wages lead to rising prices, which in turn lead to further wage increases.
• Real Earnings: Earnings adjusted for inflation, reflecting the actual purchasing power of income.

I. Headline Employment Figures & Revisions

The latest jobs data reveals a concerning trend: the unemployment rate has reached a four-year high of 4.6%. The initial report showed a gain of 64,000 jobs, but this figure is misleading. Following Federal Reserve Chair Powell’s guidance to subtract 60,000 from monthly jobs reports to account for revisions, the actual job gain is significantly lower. After accounting for two months of data and revisions, the net job creation is approximately 32,000 per month, or even -28,000 jobs per month when applying Powell’s suggested adjustment to both months.

II. Rising Unemployment & Labor Force Participation

The increase in the unemployment rate is partially attributed to a rising labor force participation rate. This is significant because a normalizing participation rate can rapidly alter the employment landscape. Historically, labor force participation has declined since 2010, potentially due to increased wealth from the stock market allowing older individuals to retire. A potential stock market correction could force these retirees back into the labor market, potentially driving the unemployment rate up to 8-10% due to the influx of job seekers. This scenario is a major concern for Wall Street analysts.

III. Bond Market Signals & Underemployment

The 10-2 year Treasury yield spread has risen to 69 basis points, suggesting the bond market anticipates the Federal Reserve may need to lower interest rates to stimulate the economy. This is a response to the weakening labor market data. Furthermore, the U6 underemployment rate has increased to 8.7%, up from 8%, indicating a broader issue of labor market underutilization.

IV. Disparities in Unemployment Rates

Black unemployment has also seen a significant increase, rising from 7.5% in September to 8.3%. This is often considered a leading indicator of broader economic weakness. It’s important to note that the household survey data used to calculate this figure is based on partial November data, prompting Powell to caution against over-reliance on the report. However, the household data does show a net addition of 96,000 jobs over two months (approximately 48,000 per month), but also a substantial increase of 228,000 people entering unemployment, creating a numerical discrepancy.

V. Multiple Job Holders & Fed Intervention

A concerning trend is the rise in multiple job holders, currently at 5.8%, the highest level since 1999. This suggests individuals are taking on multiple jobs to make ends meet, indicating economic strain. This situation may be a key reason why the Federal Reserve is hesitant to allow the stock market to decline. The Fed has recently engaged in temporary overnight operations, injecting $5.2 billion in liquidity, a practice rarely seen outside of recent history, signaling potential financial stress. This is in addition to potential Permanent Open Market Operations (POMO).

VI. Data Reconciliation & Future Outlook

While the ADP data suggests a four-week moving average of 16,250 jobs, translating to approximately 65,000 jobs per month, this aligns with the official November report of 64,000, but again, represents two months of data. The market is currently pricing in a 24.4% probability of an interest rate cut in January and anticipates two rate cuts by December 9th, 2026. The three-month average labor report shows a slight uptick, offering a glimmer of hope, while the six-month average continues to decline.

VII. Wage Growth & Real Earnings

The report indicated only a 0.1% increase in wages, which initially alleviated concerns about a wage-price spiral. However, this modest wage growth is not translating into increased real earnings due to ongoing inflation. The Trump administration had previously highlighted this lack of growth in real earnings.

VIII. Investment Opportunity & Closing Remarks

The speaker briefly promoted their real estate startup, Houseack.com (or reinvest.com), highlighting a limited-time investment opportunity with a 5% yield plus 100% upside potential, open to non-accredited investors. They also mentioned the upcoming release of an AI app expected to significantly boost revenues.

Notable Quote:

“We’re just kind of right now slowly bleeding on an unemployment rate that’s rising. And if we stay on this trajectory, we’re going to trigger the SOM roll.” – Kevin Paffrath

Synthesis/Conclusion:

The recent jobs data paints a complex picture of the U.S. labor market. While headline numbers may appear moderate, deeper analysis reveals concerning trends: a rising unemployment rate, increasing labor force participation, and a growing number of multiple job holders. These factors, coupled with signals from the bond market and Fed intervention, suggest potential economic headwinds. While the situation doesn’t currently indicate an imminent economic collapse, the trajectory warrants close monitoring, particularly as revisions to past data could further alter the outlook. The speaker emphasizes the need for caution and suggests the possibility of further Fed action, potentially including interest rate cuts, to support the economy.