the clock in the economy and the labor market seems to have finally struck midnight. There is a whole lot going on right now, much of it focused on jobs and really joblessness. Got substantial moves in the market, big swings in interest rates and forward interest rates, and none of it has to do with the Federal Reserve, except that the FED is starting to realize that it's lost the narrative. People don't quite get just how consistent the cycle pattern is, especially when it comes to unemployment. And when I say consistent, I really mean consistent, as you'll see in just a minute. The only variable is time, and we've been running against that time for quite a while already. So it's understandable why so many would claim soft Landing, no Landing, strong and resilient. They do that each and every time because that's how the pattern plays out. It starts out with what seems like no worse than a little softening, maybe a couple weak things, then seemingly out of nowhere the rug is just yanked out from under everyone.

that's not how it go. It's not just out of nowhere. It's just the pattern. This is what markets have been pricing all of this time, that inevitably we'd get to this point of no return. That we're now picking up all across the system. Just today highs in jobless claims continued and initial another major PMI Miss with downright ugly employment. And that followed an enormous Plunge in hiring for June that I went over yesterday. We got big drops in interest rates, huge Moves In forward rate swap markets behind all of those and all of it strongly pointing to the stroke of midnight. Even the highflying Dow Jones Industrials that's down 500 points today on economic fears. This has always been a cycle and now that cycle appears to finally be reaching its Crescendo. Summertime is the time for recession. I'm said to say so. We'll go over what's going on in the marketplace but that though we talk about and you'll see exactly what I mean.

when I say consistent cycle pattern, and before we get to that, let's get the Federal Reserve out of the way, because markets in the economy are quickly shoving the FED to the sidelines where it belongs. But FC held its meeting yesterday, and it did not cut rates, though you could tell quite a few members of the committee were wanting to cut rates, that they were indeed moving in that direction. The statement, however, just still playing both sides. Job gains have moderated, and the unemployment rate has moved up, but remains low. Inflation has eased over the past year, but remains somewhat elevated. And it does sound a little bit Goldilocks, except when you realize suddenly they're talking about the unemployment rate before then downplaying the signal there. And the reason they're talking about the unemployment rate is because, as we'll see in just a moment, there is a consistent pattern to all of this, and policymakers like economists understand the nonlinearity behind all of this. What nonlinearity means, we'll go over that in.

just a second. But even J. Powell was asked at his press conference about the S rule, which is not really a rule, and it's not really real-time either. I talked about in a previous video. By the time the S rule is triggered, you're already several months into a recession anyway. So, the fact that the S rule is close to its rule of thumb already tells you that even mainstream economists are beginning to sweat the labor market. As Paul said when he was asked about the S rule, We're watching really carefully for that, meaning softening in the labor market, and specifically with regard to Psalm. He said, We're aware of that role, which I would call it a statistical thing that has happened through history, which was a very lyerly answer to a pretty straightforward question. And when you read between the lines, what Paul was saying is, Yeah, we realize this is potentially dicey here, which is why he then said in response to another question, I can imagine a scenario in.

which there would be everywhere from zero rap cuts to several cuts, depending on the way the economy evolves. So while he tried to downplay the unemployment rate, is just normalization of the high-flying labor market. Like the economy, you can tell that economists and policymakers are beginning to become nervous that maybe they've missed that point of no return that we have triggered midnight, which is the nonlinear aspects of the pattern. What I mean by nonlinear is that it seems as almost that when recessions take hold of the employment market and really in unemployment, it seems like there are two different recessions. There's the first stage and then the second stage, and only the second stage, that's the one we all associate with recession itself. Instead, what happens is there's a long, very long, much longer than people realize, preamble where the unemployment rate begins. First of all, it stops falling, and it begins to tick up a little bit, maybe just a tenth of a percent here or there, and it doesn't go consistently higher. It goes up a little.

bit, then maybe down a little bit the next month, then up a little bit more, then down a little bit so that before you realize it, you're in a multi-month, even year-long process where the unemployment rate is kind of flirting with going higher, but it doesn't seem to be doing all that much. And during that time, people and especially policymakers look at that and say, okay, we've got a lot of stuff going on, and yet the economy seems to be very strong, strong, and resilient. We've got all of these economic headwinds, yet unemployment is just kind of meandering a little bit higher, and it's been doing that for months and months on end. So the economy is strong and resilient, it must be, and then, oh no, crap, it all falls apart. And this happens every single time, and I mean every single time. So let's review the historical information, the actual evidence, like we did when we saw that rate cuts don't help in the situation once the economy gets past that point of no return. It doesn't matter what the Fed

does the FED is being shoved to the sidelines because that's where the FED actually is. Rate cuts are simply a reaction to the weakness that we're going to see in all of these patterns. Now the FED didn't start cutting rates and start targeting interest rates as I said in recent video. Until the 1990s, really late 80s and 1990s. But it doesn't matter whether the fed's cutting rates or not. Low rates are a bad sign, not a sign of stimulus. And it goes all the way back to 19 1960. It goes back further into the recession of 1950s. But let's just start with the 1960 recession and we'll go from there. In 1960, the unemployment rate hit its low in February of that year at 4.8%. And then you can see for the next seven months, the unemployment rate was kind of sideways to modestly higher. And this one was a little bit higher than some of the other preambles. It rose about 8/10 of

8/10 of a percentage point, but by October of 1960, 7 months later, all of a sudden the unemployment rate starts to take off as the full recession begins. Fast forward to 1970, a decade later, the next recession cycle. The unemployment hit its low in May of 1969 at 3.4%. Sound familiar? And then, like before, the unemployment rate was modestly higher, just 3/10 of a point to its highest point during this initial period, until you get to January 1970 when the unemployment isn't just kind of gently moving sideways to higher, it suddenly takes off and in what seems to be a sustained straight line fashion. That's the nonlinearity where you can't see this point of no return coming, it just seems like it starts out okay and then bam, the rug gets pulled out and unemployment begins to surge. That's the part that everybody associates with recession, but we also need to understand the other part of it. 1973, the next recession in October of 1973.

unemployment rate fell to a low 4.6%, and then once again in this initial stage, it's only a little bit higher and not really in all that it's back and forth during these initial this initial stage so for seven months you get that initial stage again seven months that's a number that keeps coming up repeatedly seven months are in that initial stage unemployment rate only goes 6/10 of a percentage point higher and then June of 1974 it takes off and Rockets full-blown recession 1980 May of 1979 the unemployment rate Falls to 5.6% and then over the next 6 months this one's is the shortest one of the bunch it goes sideways to moderately higher just 4/10 of a percentage point and then December of 1979 there the recession begins unemployment rate from there goes up sharply 1981 December of 1980 the unemployment rate Falls to 7.2% not really recovering from the 80 recession these recessions

were the double dip very close together but then July of 1981 August of 1981 suddenly there's that nonlinear that nonlinear shift again that transition where the unemployment rate had unemployment itself had been relatively sideways to slightly higher and then August 1981 it Rockets upward so You' got seven months yet again in that period so from the recessions from the 1980s and before we see this seven month 6 months in 1980 period where the unemployment rate kind of goes sideways to slightly higher everybody says strong and resilient and then that point did it's like a a flip got switch got flipped and it just Rockets from there in the recessions after that the three that come after 1990 2001 and 2008 what you see is that this Preamble or preliminary phase is extended and the reason for that is because we went from a heavily an economy that was heavily relling on manufacturing therefore the inventory cycle produced a huge influence on the overall economy to more

of a Services-oriented economy, especially as jobs and production moved offshore in the latter stage of euro-dollar globalization. What that meant for the recession pattern was it didn't change the pattern at all, that's still the exactly the same pattern. It meant that the preamble or the lead-up to that nonlinear point of no return was extended. It's actually much longer. In 1990, actually 1989, March of 1989, the unemployment rate hit its low at 5%, and then it went sideways to a modestly higher from there for 15 months. So, you had this preliminary stage that was 15 months long, and during that time, the unemployment rate was back and forth, and it only got as high as 5.4% in April, May of 1990, and everybody said, Soft Landing, strong and resilient, let's do some rate cuts from Alan Greenspan with this new interest rate targeting. And then, July 1990, suddenly nonlinearity. Unemployment takes off from there, same again in 2001, and 2001.

com bust and .com recession April 2000. The unemployment rate falls to 3.8% and it goes sideways to a little bit higher throughout 2000 and into the early part of 2001 where it never it doesn't get any higher than 4.4%. So that period was 13 months before you finally get to May 2001 when it takes off in June and Beyond. So 13 months of that initial stage again consistent pattern 20 8 the Great notot Recession. The unemployment rate hit its low in May of 2007 just a couple months after banki said subprime was contained and then it was gently higher little bit back and forth through there through the rest of 2007 as everyone said despite the housing bus that everybody can see happening the economy appears to be strong and resilient even by May 2008 or March 2008 excuse me where bare Sterns is failing of hedge funds Carlile all of that stuff massive mive problems in the

monetary system. The unemployment rate is still only 5.1% at that point. Again, everybody says, Well, the economy is strong and resilient, but then look what happens after May. May 2008, the unemployment rate shoots up to 5.4%, and from there, it just skyrockets higher. So for 11 months, the unemployment rate was just sideways to modestly higher, never all at once, a little bit back and forth, this preliminary stage, and then seemingly out of nowhere, it just skyrockets forward. Now look at the unemployment rate and its behavior over the last 14 months. The unemployment rate hit its low in April of 2023, immediately following the banking crisis last year and the start of a credit crunch. The unemployment rate in unemployment overall begins to rise in May of 2023. Everybody said it was a good unemployment rate, good unemployment, that people are entering the labor force, and there's just not enough jobs for them, and that may have been true in the initial stages, a couple months there, but

September, October, and Beyond. It's not this. There's no good unemployment. This is just the same pattern playing out that we've seen in every single recession cycle in the postwar history, and we're already up to 14 months, and the unemployment rate has gone up 7/10 of a percentage point, consistency very similar to each of the prior three services-oriented economy recessions, and the data continues to come in suggesting that we may have reached, if we haven't already passed, that point of no return. Talked yesterday about the plummet and H, the plummet and hiring, the plunge in hiring. We've also got jobless claims that came in today. According to the Department of Labor, initial claims were 249,000, which is the highest since last year, and again, initial claims aren't that high, but look at how they're behaving, look at how they're moving. If it was only initial claims, you could dismiss that and say, okay, that's nothing, but we've got all the rest of this, the unemployment rate, the consistent cycle.

pattern and continued claims backs up initial claims. What we see in continued claims is again a more aggressive move that suggests something has changed more recently, and that change isn't the pattern in the cycle; it's the shift from the first stage potentially into the second stage, that nonlinear transition. In addition, just today, the ISM Manufacturing IND down substantially again, and in the details, the employment index for ISM Manufacturing 43.4, really low. That's a new cycle low going all the way back to 2020, that's consistent with recession, the full-blown recession part, this past the point of no return part that's after the ISM non-manufacturing index, at least for June. The one before. We'll get the update on that, the ISM non-Manufacturing Index on Monday. That one, the employment index for non-manufacturing, was 46.1, which is really bad, totally recession, recession level, and the ISM's non-manufacturing employment index correlates very strongly with a lot of the labor data, including up until the

last couple of years, The Establishment survey, so the ISM non-manufacturing is correlating strongly with the household survey, which means it's also correlating with the employment part of the unemployment rate. We got lots of incoming evidence that shows nonlinearity in the labor market, which was already in trouble, which was already deep into that first phase of the recession cycle. May indeed be shifting into that second phase where unemployment doesn't rise gently because more people are entering the labor force. Unemployment starts to go up because it's the recession that everyone recognizes, and that's absolutely a danger that economists and Fed policymakers are aware of, which is why they're inching their way towards the rate cuts. And as I said, I'll keep pointing it out, and all the evidence shows rate cuts don't help. All they do is that they signal that policymakers are aware of just how bad the situation has gotten to be. And so when they start cutting rates because we get into this

nonlinear segment of the recession. Unemployment just goes up regardless of what the FED does. So, one rate cut leads to two, leads to three, leads to four, leads to five, leads to six, and many more. It becomes, it quickly becomes a series of rate cuts. That's exactly what the markets have been pricing in, increasing fashion over the last several months. Look at the Treasury curve today. Interest rates are down pretty substantially, especially with J. Powell saying, I'm going to be completely out of the way here. We're not going to be hiking rates. The Fed's more likely to cut rates. So, the Fed's out of the way. The 2-year Treasury note down to 4.19%, that's a new multi-on low. The 5-year's at 3.84%. The 10-year's under 4%. The 5-year, 10-year spread, that's still uninverted to about 13 basis points. So again, the uninversion case is playing out in the middle. The 2-year, 10-year spread is kind.

of holding at 20 basis points, but that's still down substantially from where it had been. So you got the bull steepening case developing in the treasury market, but let's talk about forward interest rates to try to get a sense of what we're really talking about here. Forward interest rates that are tied to suur means that some of it has to do with Fed rate cuts. So what is the market pricing as far as where short-term money rates are going to go given all of the things that we know about the historical pattern as well as all the data that suggests these things are playing out yet again consistent with that pattern? What does that mean as far as interest rates, forward interest rates, and what do forward interest rates or the prospect for forward interest rates potentially tell us about how bad this could possibly get? Well, so for Futures this morning, huge buying all across the curve, and it's not just today, it's been that way for the last several weeks. The June 2025

contract just to pick that one. The June 2025 s for futures is up 19 basis points just today. The price is now 9629 which if we take that price literally, which you should not do. These are not predictions. These are probabilities. But even if we take this price literally, what it says is the market is anticipating that suur will be around 3.75% in the middle of next year. Well, right now the federal fund's upper bound is 5.5% and so for itself yesterday was 5.38%. So just taking sof for futures contracts literally, June of 2025, that would imply six to seven rate cuts out of the fed by the middle of next year. But that's not what silver Futures actually tell us. What they're telling us is that the range of probabilities, like a moving average, is focused on that, that, that spot, that, that forward interest rates 3.75%. There is a range of possibilities from rates going all the way to zero to rates not going necessarily all that low.

at all, what the market is increasingly saying is that the mean probability is shifting lower and lower and lower. That, on average, these scenarios suggest something like six or seven rate cuts, but more likely it's more than that consistent with the historical pattern in every respect. Once we get past that point of no no return into nonlinearity, unemployment goes up, and the FED follows it with one rate cut after another after another. So, what forward rates like the treasury curve itself, like interest rate swaps that I keep pointing to, what they're all telling us is that conditions continue to move in that direction, which suggests specifically in terms of interest rates once the FED starts cutting, it won't be able to stop. We've gotten past that point, the initial stage in the econ economy. So, given everything I just said, markets, the data that's coming in tomorrow's payroll report for July is probably going to be plus 500 if not plus a million because the establishment survey that's uncorroborated by anything.

it could be anything, and it wouldn't really matter. Markets are pricing substantial weakening rates go down because of lowering growth inflation expectations, especially the growth part, with the FED just frantically falling along. Then the bigger question is: what happens as all of this unfolds? Markets are not very sanguine, knowing just how artificial the boom of the past few years have been. And let's not forget we got Financial imbalances like the CR bus to contend with, which is still ongoing, and now a stock bubble, which is premised on a technology hardly anyone appears to understand. And it's even worse outside the United States; the pattern is playing out from one place to the next all across the system, leaving us to again repeat the fact that we're in a cycle, we've always, always been in a cycle. It hasn't changed this entire time, and inevitably we were going to get to this stage. And now that we're looking, it's looking like we're here. There's nothing the Fed's going to do about it except

they're going to cut rates recognizing that all of these things are indeed unfolding. I keep saying rate cuts don't help because history shows conclusively rate cuts don't help. And you don't have to take my word for it. We went through all of the evidence in the video link below. As always, thank you very much for joining me. Huge thank you to your ality members and subscribers. And until next time, please do take care.

It's Official: Unemployment Is About to Hit the Fan

Monetary science reborn. Rediscovering the principles of currency. Putting central banks where they belong. Welcome to Eurodollar University, your place for all things modern money and monetary science. The YouTube channel for Jeff Snider, from here you can begin to investigate all the ways in which the global monetary system impacts you: economy, politics, investments and more.