XLY: The Labor Market Is Flashing A Strong Recessionary Signal

Damir Tokic
11.76K Followers

Summary

  • Temporary help service jobs have been contracting since December 2022, signaling a potential recession.
  • Initial claims for unemployment have been trending higher, suggesting a weakening labor market.
  • The labor market is gradually slowing down, while inflation remains elevated, with leading indicators pointing to a weaker labor market.
  • The discretionary sector is likely to sell off as the overly optimistic earnings expectations get revised lower.
Creative collage. Recession, inflation, unemployment hit a confused man. He does not know what to do. The concept of a financial crisis

iZhenya/iStock via Getty Images

Despite a very aggressive monetary policy tightening since March 2022, the labor market is still very tight with a 3.4% unemployment rate and nearly 10M job openings. However, under the surface, the leading indicator of the labor market strength has been flashing a very strong

This article was written by

11.76K Followers
Commodity Trading Adviser (CTA), member of National Futures Association. Professor of Finance, research on Global-macro issues. Editor-in-Chief, Journal of Corporate Accounting and Finance.

Analyst’s Disclosure:I/we have a beneficial short position in the shares of SPX either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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