Awwwwwe... Regarding the labor, i.e. employment, side of the equation. What you mentioned about the reticence ("hording") of laying-off of skilled talent is true when it's believed to be a bump in the road period. In the past, company wide lay-offs (across the board hair cuts) were also a handy-dandy way to scooch out the older, higher paid, talent. By now, the lion's share of the Boomers are out or moving out of the workforce. The covid helped accelerate that, BTW.
What is next is a squeeze on the bottom-end employment - IMMHO. There is an article out last week about Wendy's using AI Chat bots for order takers. Those jobs are, soon to be were, much lower paying. And of course, there is automation coming to those work places also because of wage increases, but also for consistency reasons. Weird aside; I still see some Popeye's fast-food restaurants that have not opened up the in house dining or ordering, presumably for cost cutting reasons at this point.
One other hiring practice to cover - the employee pipeline. I tend to call it the fake jobs, the what-if jobs, the hope we find a unicorn jobs. Is the job you are applying for even actually available? I've been in companies during heavy lay-offs. One of the first things that happens is that all job postings are cancelled and the hiring manager has to go through a process to justify getting one reactivated, i.e. refunded. It is hard to get a hiring rec, but much harder to re-justify it during a down sizing. Back in the day, it was often in hopes of placing workers within the company for the reasons you mentioned (hoarding, retention, not starting anew) previously. But most don't seem to do that now a days. Now it's all about the short term bottom line.
The point being, the job posting will still show on the external interfaces, internets, job boards and what not and often even their own internal sites. But many are ghost jobs. A similar but different example from the Ross Perot days was how they would post jobs that they didn't even have yet. They would be bidding on large outsourcing contracts, which take a long time and require a smorgasbord of skill sets. As negotiations moved closer, they would start posting tons of jobs for various skills to be ahead of the curve should they win the contract.
I don't even want to drill into the "migrant class" workers streaming in at the moment, but I will say it will skew the labor participation rate a fair bit, while clogging up the housing needs and placing downward pressure (competition) on labor rates. I doubt they will automatically be included as work force "participants" because of their sketchy status and general desire to stay under the radar. In short, it's an unknown work force, but I generally don't see them as taking any high end, white collar, jobs. Regardless, they are mouths that need fed and they will be dropping babies aplenty in short order. But in 7-10 years they might have a court date to decide if they can begin the 8-10 year process to become a citizen. Yah, right..
I would point out an interesting inflection (reflection) point in our history regarding what I called the "migrant class" We've been there before, right after the Civil War. A lot of people moved from South to North looking for paying jobs, for a change.
BTW: they were willing to perform them for less $$ than the existing Northerners **cough** Yankees **cough**. Things took a very long time and a whole lot of effort (brutal at times) to settle from that previous experience. A glaring difference - we are not currently in a labor intensive industrial or manufacturing posture this time around.
FWIW: ye olde Okey-Doke shuffle, aka Communism, (below) ain't gonna get 'er dun either
Yes, indeed!
Although I'm not sure widespread panic is imminent, there are warning lights flashing all over the dashboard, and I think we'll see myriad problems soon enough.
Amid this, the S&P 500 is down only about 14% from its all-time high at the beginning of 2022. Don't you think investors are far too sanguine?
The narrative and video WYID posted above is from an interview with economist Dave Rosenberg, publisher of the excellent "Breakfast with Dave" report that comes out around 8 every weekday morning. It's always one of my favorite reads of the day.
For months now, he's been making the case that the unemployment rate is one of the laggiest of lagging indicators, and that it rarely bottoms until a recession is just over the horizon or even underway.
Remember, many firms "hoard" labor these days, since it's very expensive to lay people off only to need to hire them back a year or so later. By that time, it's usually necessary to hire (and train anew) a whole different set of workers.
Once again, go look at December of 1969, when the unemployment rate bottomed at 3.5% and it was later seen that a recession began that very month.
"Don't fire until you see the whites of their eyes!"
https://allthingsliberty.com/2020/06...of-their-eyes/
And, as Rosenberg says, recessions are cleansing processes, wherein malinvestment is swept away and the ownership of good assets transferred to stronger hands.
It's clear that nothing in the way of recession expectations is remotely priced in to today's markets.
If history offers any guidance (as it usually does!), monetary policy in the form of tightening acts with long and variable lags, often of 6-12 months. There's a good argument here that the lag may be longer than usual, owing to the excess savings arising from the humongously over-the-top $1.9 billion fiscal surge passed in March 2021.
At great cost, this possibly bought the economy some additional time, as household bank accounts get drawn down. Thus the typical 6-12 month lag could get stretched to 12-18.
Cautious, value-seeking investors would therefore do well to be very patient. You could see some very attractive opportunities within the next 12 months. The most successful investors always endeavor to capitalize on bear markets, recessions, fiscal crises, and busts.
So, do I agree with Rosenberg's take that a recession and concomitant market selloff is baked into the pie?
Why yes, I do!
Originally Posted by Texas Contrarian
