The Labour Curveball

9 January 2023.

Our team absorbs a lot of different economic/market views and opinions from a lot of different sources. We also do a ton of our own analysis. To put it bluntly, 2023 is lining up to be one confusing year. Inflation, the path of central banks, the economy and, of course, how the bond and equity markets react all have very divergent views. For a more fulsome synopsis of our views, we suggest looking at our 2023 outlook (Bear market end game). In this report, we narrow our focus to examine how so many can be calling for a recession while companies keep hiring.

Last year’s jobs report and the final December reading that came out recently show that the U.S. economy added 223k jobs, unemployment dropped to a multi-decade low of 3.5% (lowest since ‘the 60s), and even the participation rate ticked up a little. In other words, 4.5 million jobs added during 2022. For comparison, the average from 2010-2019 was around 2.2 million jobs. Of course, the economies of the world are still recouping jobs in a number of categories as we all move back to ‘normal.’ The first two charts below show total U.S. employment with a ‘really simple’ dashed line that one could argue would hold if the pandemic hadn’t happened. The biggest gap is in Leisure & Hospitality and Education & Health, which are still missing jobs. The final chart is Canadian employment, which appears to have recovered better, back to trend.

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