Friday, 3 November 2023

US labor market softens (18-year cycle)

Softly, softly...

US nonfarm payrolls increased by +150,000 in October, rather less than expected, and the preceding months were also revised down by a combined -101,000.

The participation rate ticked down, and the unemployment rate also rose to 3.9 per cent.


Source: BLS

Average hourly earnings increased by only +0.2 per cent, to be +4.1 per cent higher over the year.

Hardly a disaster, but suggests that the interest rate hikes have gone more than far enough, the way things are trending.

The first interest rate cut in the US is priced in for June, while rates are also looking peaky in Canada, the Eurozone, the UK, and New Zealand. 

Bond yields down sharply, stock futures UP!

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This morning I interviewed Catherine Cashmore from Land Cycle Investor (a 75-minute live interview as part of my coaching program) and increasingly it seems many of these figures are lining up with her previous forecasts. 

In particular - as she previously predicted - after the anticipated mid-cycle slowdown, Aussie real estate is going into the boom phase of the cycle between now and 2026 (perhaps 2027 for Perth) due to a chronic dwelling shortage - while stocks will likely enjoy the steady decline in interest rates through late 2024 and 2025. 


Source: Fat Tail, Land Cycle Investor

I've been sceptical of some the implied timings of the 18-year cycle in the past, but when you dig into it there are some fascinating trends (so many of which seem to keep coming true).

Following on from Catherine's analysis, I'd be wary of buying into some of the more overheated regional property markets over the next year or two.

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Foreign buyers are back, according to NAB's survey, which makes sense given record immigration and all-time low rental vacancy rates:


Source: NAB

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