Holy Crap this is UNEXPECTED

holy crap what happened in the jobs

market today and what does it mean for

you well the first thing that you need

to know is there are a lot of fears

circulating again about a wage price

spiral wage price spiral is like the

worst thing that we could possibly face

in an economy wage price spiral and a

fear of a spiral is what got me to sell

in January of

2022 so you don't want a wage price

spiral that's when wages are spiraling

out of control which then leads

inflation to spiral out of control and

then people demand more pay because

inflation's up and then that it causes

more inflation very bad and the numbers

we got this morning screamed wage price

spiral I mean consider the expectation

versus reality expectat expect I'm

making up words here average hourly

earnings expectations were. 3% we got 6

that's twice that's bad that's a very

high number average hourly earnings

year-over-year came in at 4.5 five

versus the 41 expected these were huge

numbers why well there's a thesis say to

why and it might not actually be that

bad first of all we need to look at when

hours worked plummeted as low as it just

did because hours worked is a factor in

average hourly earnings basically what

they're doing is they're saying hey if

you make a salary of let's say $7,000 a

month and you worked A1 60 hours well

your pay is roughly

4375 per per hour right uh but if you

worked let's say 10% less hours so 144

hours your average pay bumps up to 48

because you're working less hours this

makes sense right you're getting paid

the same on salary and not everybody's

salary obviously but a group of people

are getting paid the same on salary

whether you're working more hours or

less so when hours work plummet pay goes

up okay well what happened to hours

worked a disaster an absolute disaster

this is on ec.com by the way if you want

to see the charts uh I uh we're making a

free app by the way for this as well but

right now it's just ec.com but anyway

look at average hourly uh average hours

worked per week you're at 34.1 this

plummet right here is the largest

plummet that we have had or the lowest

level I should say it's at the lowest

level that we've had since this line

right here you know where that line is

covid March of 2020 okay you want to see

where the prior low was right here what

was that Great

Recession so what happened well some

economists are speculating that what

happened is unseasonably bad weather not

necessarily more snow just bad weather

that's at least one argument now some

other economists are countering that and

they're saying what do you mean like we

all had the weather data if we all had

had the weather data why why would we

have such a a bad Miss on expectations I

mean we frankly had a four Sigma move on

expectations four Sigma beat on the jobs

data which is

crazy well it's entirely possible that

we have new adjustments for January as

well and in January that's usually when

you see a lot of people get their pay

bumps now seasonal adjustments should

make up for this but consider what's

pushing up wages in January well usually

you have seasonal adjustments you have

the annual pay bump again that should

show up in the adjustments but you know

again the way they calculate the jobs

numbers also changes in January so

changes to the way they calculate things

pay bumps in January and now this idea

that who all of a sudden ours work

plummeted that could be an excuse or

we're screwed see there are two ways to

look at that one is yeah that's an

anomaly that's very odd and it's not

going to happen again this is the chart

from Nick T this shows you private

sector monthly payroll growth thre month

average obviously we had a skyrocketing

here we had a shacking if we were just

looking at the one month we would have

had a spike up to about here where my

mouse is this is just the 3-month

average as it's been revised because we

had a revision to last month as well so

it really pushes this line up we do get

volatility in this number and it's not

necessarily a bad thing we don't really

want an unemployment recession right yes

an unemployment recession would drive

rate Cuts quickly Jerome Powell made

that clear Jerome Powell said yeah look

if the labor market weakened that would

absolutely he used the word

absolutely change our position on rates

but it's not and I think he knew that on

Wednesday that's why he was so

confidently able to say oh yeah if

unemployment weakened absolutely we'd

lower rates I'm thinking to myself yeah

he already knows what the unemployment

data is going to be on Friday and sure

enough this morning right before the

numbers came out I'm like you know jpat

was a little hawkish on Wednesday I have

a feeling he knew these numbers came in

hot boom blowout absolute blowout okay

so what else do we need to know well

look at Atlanta fed's real GDP now

indicator we're coming in on Atlanta fed

which does not even include the jobs

data we just got we got a read of

4.2% which is insane and this has been

relatively accurate the last few

quarters so GDP up

jobs up we've got layoffs or we had

layoffs but then again now you've even

got Facebook saying oh we're hiring

again we've done our firing now we're

back into hiring again so you're

literally in this place where it's like

GDP is booming companies have bottomed

out on their layoffs maybe maybe people

are starting to hire again maybe the

idea that there's going to be a labor

recession totally wrong uh I mean yes we

did see an increase in layoffs and it

feels like we're still getting layoff

announcements but now January

is behind us and so when we look at the

charts of of layoffs you know yeah they

ticked up in January but can we argue

that you know this is such a big deal I

mean okay employees laid off per this

layoffs.fyi web page 29,000 who cares

when you know apparently the uh

establishment survey told us we just had

over 300,000 new jobs created and it was

broad-based as well they called this

diffusion that is many different

Industries it wasn't just government and

education it was everything it was Tech

you name it so this is very fascinating

when you get a broadly now expanding

economy which sort of essentially says

hey everything's kind of booming again

the problem with that is what does it

mean for people betting on rates coming

down well means you have to wait longer

which is frustrating if you're making

bets on interest rate sensitive stocks

you're down to a 20% chance of March I

think that's basically dead uh and and

the the other thing that's happening now

is you're starting to

unpr May right now instead of basically

being 100% certain we were going to get

cuts by May we're actually only sitting

at about a 72.8% chance that we're

actually going to get Cuts in May so uh

and then if you go out to June for June

you're looking at about a 96% chance

that we're going to get our cut but what

happens if you don't very interesting

there is actually this thesis that the

Fed might not want to cut rates before

the election because they don't want to

appear political because everybody

thinks oh yeah they're going to cut

before the election of course they're

going to be biased they might want to

unbias in the other way I don't know

that they'll wait that long uh that

would certainly hurt some more of the

interest rate sensitive place but in the

meantime it's actually a pretty

phenomenal thing for the economy overall

markets are obviously reacting very

positively indices are up at all-time

highs interest rate sensitive stocks are

left behind that's because interest rate

sense uh stock um cut bets well interest

rate cut bets are being Unwound so

totally makes sense but what you also

have is bond yields up 17.8% today on

the 10-e you're at

4.04 on the 10e but what's remarkable is

as you're at 4.04 on the 10year you

actually go to the q's you're up 1.2% on

the q's it's insane the economy is just

exploding uh with this this sheer

optimism uh that uh maybe there is no

recession after all which is weird

because still well inverted on the 102

which pisses off a lot of the Bears look

at the 102 right now at the time of this

recording we're atga 34 bips we've been

coming straight down basically all

January on the inverted yield curve we

can look forward to CPI data coming out

on the 13th expectations month over

month 0.1 expectations on the core month

over month3 you jump into true flation

though true flation uh implies that uh

inflation should be even lower now I

usually find that true inflation is

about half a percent too high but right

now you look at what true inflation is

showing it's showing

1.34% and I'm not seeing companies still

every day looking at those earning calls

still not seeing companies actually talk

about wanting to raise prices so what

does this mean well it means an

expanding economy with prices coming

down jpow hey you know we want to see

more evidence that inflation is coming

down and is going to stay down okay

hopefully we get that here for January

February March and we hopefully

reiterate that there is no wage price

spiral and inflation is not sticky in

that case you could actually be in this

insane environment where you get rate

Cuts while markets are at all-time highs

which basically push them to further

all-time highs essentially the Nike

Swoosh the Nike Swoosh thesis continues

to play out the problem is there was the

belief that the Nike Swoosh would also

take interest rate sensitive stocks with

it as you started unpriced uh rate hikes

that hasn't happened yet though so if

you're holding on interest rate

sensitives you still waiting so

hopefully you've got somewhat of a

balanced portfolio where you have some

exposure either either to the chips or

Amazon or Facebook the question now is

is it worth selling interest rate

sensitive to buy the expensive others

that's a topic for a different video but

I want to hear your thoughts in the

comments down below so these are my

thoughts personally holding firm I'm a

big believer in uh in the strategy it's

just going to take more time to play out

in this jobs report while it may not be

concerning from an inflation point of

view mostly because what have we talked

about with those average hourly work

that bizarre decline that we haven't had

since March of covid uh and 2009 not so

concerned about wage price spiral

inflation expect expectations from

University of Michigan uh stable more

concerned uh about basically how long

are we going to keep rates high but then

again the only reason I'd be concerned

about higher rates other than obviously

interest rate sensitive stocks is that

it would cause damage to the economy

that's a very Kathy Woody an argument

nope not the case so far though uh Kathy

Wood might end up being wrong on this

one that uh the fed's gone too far maybe

the FED has done just enough I don't

know we shall see anyway thanks so much

for watching good luck out there crazy

crazy Wilder why not advertise these

things that you told us here I feel like

nobody else knows about this we'll we'll

try a little advertising and see how it

goes congratulations man you have done

so much people love you people look up

to you Kevin P there financial anist and

YouTuber meet Kevin always great to get

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