Soaring Job Numbers Mask a Fracturing Labor Market

Unveiling the Paradox

This economy continues to be very difficult to get a good read, this past Friday’s non-farm payroll report being a good example. Despite seeing an increase in continuing jobless claims, a big jump in the Challenger job cuts report and a spike in layoff announcements, monthly job growth came in at above 300,000 for the 2nd straight month and the highest since January 2023. While the market bulls will use this as more evidence supporting the “stronger for longer” narrative, there is one piece of this report that stood out to me - growth came from part-time, not full-time, jobs. Part-time employment hit its highest level since 2018. Full-time employment hit its lowest level in about a year. The average number of hours worked, save for the dip during the COVID pandemic, hit its lowest level since 2010. If you’re looking at the total labor market picture beyond just the non-farm payroll number, I think we’re actually seeing the jobs market starting to crack.

We finally saw a little more volatility in the markets, especially in the bond market, but the asset performance mix again looked similar to what we’ve seen over the past few weeks. The S&P 500 was up, small-caps were down and utilities underperformed. Long-term Treasuries were especially volatile. The 10-year yield dropped by about 30 basis points from Monday to Thursday before reversing sharply on Friday’s jobs report. I think we’re seeing a continuation of the trend that’s seeing investors slowly price out some of the most aggressive Fed rate cutting expectations.