Let's take a look at the May job turnover report for 9 people. But before that, there are political issues that are overshadowing the market recently. Regarding this matter, I have organized some personal thoughts. As the U.S. presidential election approaches, discussions on the correlation between Trump and inflation seem to be actively taking place in the financial market. With Biden significantly falling behind in TV debates, the possibility of a Democratic candidate replacement is increasing. In such a situation, concerns are spreading that if Trump were to control both the executive branch and the legislature of the Republican Party, his existing economic policies could become a structural cause of inflation. Recently, in the financial market, the words Trump and inflation are frequently mentioned. However, this is not confirmed data as actual economic indicators but rather a reflection of Wall Street's anxiety.

I want to give you the word that Trump's policy is basically characterized by large-scale tax cuts and protectionist trade policies, so overall, trade wars are inevitable, and market-wide inflationary pressures are likely to continue. In fact, looking back at the time when Trump was in power, even though he implemented the same policies, inflationary pressures were not that high. In this regard, the market's anxiety can be seen as somewhat excessive, and especially yesterday, Fed Chair Powell directly mentioned that inflation is easing. The market quickly regained some sense of relief, and the expected inflation indicators are showing a fairly stable trend. Despite this situation, with actual data numbers not yet available, now.

As the presidential election approaches as a political issue, there is a growing concern in the market that Trump will inevitably trigger inflation. Even though the movement of oil prices itself has actually increased inflationary conditions, it is not accurate to view it that way. Nevertheless, the market is shaking as if high inflation is a fact, which seems to be based on a foundation of anxiety. Due to this, there is quite a radical volatility appearing. In this situation, I think it is necessary to focus on observing actual data and policy changes. Rather than being swept away by the anxiety in Wall Street, it seems that a rational judgment is needed. At this point, it is important to see if there is any excessive market reaction and how much discrepancy there is with actual economic indicators.

We need to look at whether it has happened, it will become an investment point. The market is not always rational. If it were 100% rational, theoretically, there would be no investment opportunities. Therefore, unless you are generally a trading investor, you should focus on value investing or finding fundamentalists. That is the task we should focus on. Yesterday, when the job report was updated, the number of job creations reached 8.14 million, an increase of 220,000 compared to the previous month's estimate of 7.96 million, surpassing expectations from all aspects. It showed an increasing trend after falling for a while. Such temporary rebounds during a downward trend have often occurred. Therefore, we need to pay attention to how the market trend is unfolding amidst these short-term fluctuations.

It seems necessary to summarize that this temporary rebound phase, which has not yet escaped from the thoughts of long-term decline investment, does not have any special meaning. While looking at this, I cheered, not because of the temporary rebound, but because of gradually cooling employment market. There were unexpected factors that were thought to cause a sharp cooling in the employment market, but it is gradually cooling down more than expected, which has been confirmed. Therefore, as wage pressure eases, it will help in managing inflation. This is how I see it, thinking that we can avoid a sharp increase in unemployment than expected, and thus evaluating that the level of consumption will be maintained to some extent. If the central bank appropriately controls policies with that time difference, the market will have some room for a soft landing.



Some people who come in more positively evaluate the reason why the job market is cooling down as a natural adjustment process due to changes in industrial structure. However, some people tend to view this part too positively, leaning towards exaggeration. Overall, rather than cheering for the temporary rebound itself, it can be evaluated as a process of landing. So, it should be interpreted in a positive light, but it is important to consider the overall economic situation and other indicators comprehensively. However, market participants tend to react more sensitively to short-term news rather than long-term trends. Therefore, such reactions ultimately contribute to increasing unnecessary market volatility. This is how we should look at it. The gradual cooling of the job market is not a problem, but a positive signal.

You may interpret it as a lateral signal, but the problem is that you can find it in historical cases. If you look at past patterns, the job market always gradually eased and then suddenly deteriorated, which was mostly the case. As the worsening speed becomes too steep, many cases were ineffective in responding to actual policies. Once it starts deteriorating, unemployment quickly spreads to other areas, creating a vicious cycle. When unemployment increases, consumption decreases, leading to a further decrease in employment, creating such a vicious cycle. When this economic uncertainty grows, companies can suddenly carry out large-scale restructuring. This overall deterioration in employment can lead to an increase in loan delinquencies and problems spreading throughout the financial system. Therefore, as it is currently cooling down,

It is difficult to assert that the job change report, which seems to be progressively declining, is definitely safe. Looking at past patterns, it is still a time to carefully monitor and prepare rather than judging based solely on the data. It is important not to overlook subtle changes in detailed economic indicators or potential risk signals. Furthermore, the current job report is more superficially grasping than expected. I have mentioned this multiple times. Currently, the calculated ratio of job openings per unemployed person is decreasing gradually, but trusting this number alone could be a very naive economic outlook. The reason is that the calculation method is too ambiguous, which could either inflate or shrink the figures.

Because it broadly recognizes various ranges that are not there, that's why. I mentioned about economist Schamdoi's part. The employment numbers are being inflated, and it is the lowest economic indicator we have not seen in the past. Moreover, the response rate is also decreasing, so the quality of the data is quite suspicious. That's what I said. If you look at the recent Jolt response rate, it's about 33% at most, sharply declining. Most people are not responding, so the quality of the data is quite doubtful. We have no choice but to see it this way. Summarizing this, although the number of monthly unemployed persons has increased slightly compared to the previous month, it is still at a low level of 0.80 to 0.81. Rather than this, look at this more. The purchasing power per unemployed person is 1.2 times higher. It dropped to the lowest level since July 2021, but what happened last month.

There hasn't been much change compared to the previous month. As of June 21st, if you look at the job site Indeed, it's in blue and continues to decline. Because it is continuously decreasing, we can speculate this as leading data for the job market. Although there is volatility in the job market, ultimately, with this trend of continuously decreasing job postings on Indeed, it can only converge in this direction. The key point would be this slope. The volatility of the slope itself may be visible, but the direction has already been determined. In summary, if we look closely at the job postings for June, the sector that led the employment growth after the pandemic showed a bit of hesitation last month. However, starting from this month, it has turned back to an increasing trend. According to government job statistics, there was an increase of 179,000 jobs, and even the results of the previous month were revised upwards. Additionally, the number of job postings in the healthcare sector also increased.

It was counted as an increase of 78,000 in May. A peculiar point in the human rights in May is that the number of employees in the manufacturing sector has increased by 115,000. However, when looking at May, the ISM PMI employment index slightly increased, exceeding the baseline of 50 overall. Looking at the contents of the PMI in June, the employment area decreased, indicating a contraction. In this regard, when looking at the May JOLTS report, the increase in the number of employees in May can be interpreted in this way. However, as the PMI employment index fell into a contraction area in June, it is a temporary increase. This can be summarized in this way. Looking at the total number of hires in May, it increased by 140,000 compared to the previous month, reaching 5,756,000. The total number of retirees increased by 85,000, totaling 5,422,000, voluntary retirement.

There has been a slight increase in the number of layoffs by 7,000 compared to the previous month, and if we look at the number of layoffs, there has been a 7.3% increase of 112,000 compared to the previous month. While it may not be a significant change in terms of the cold weather, layoffs can be considered as a representative lagging indicator of an economic downturn. Therefore, even such a slight increase should be closely monitored. In my opinion, when looking at the overall trend of layoffs, the level has decreased. In the early 2000s, the average exceeded 2 million cases, but now the level is decreasing. Hence, it is not safe to simply evaluate that layoffs are lower compared to pre-pandemic levels. It is important not to interpret economic downturns and unemployment rates simplistically. Referring to past videos on this topic may be helpful. In general, as the economic downturn cycle shortens and the economic downturn cycle lengthens, the trend line of the unemployment rate is upward.

I have mentioned patterns of adjustment and downward adjustment. This was also reflected in the changes in the natural unemployment rate. Looking at this trend, when evaluating layoff data, it is not enough to simply compare it to the average level before the pandemic and conclude that it is lower. From the perspective of the overall decrease in average numbers, according to the analysis of the Cleveland Fed's unemployment trend paper, it is not appropriate to evaluate that the unemployment rate or the number of new unemployment claims, which includes layoffs, has stabilized below pre-pandemic levels. I have consistently emphasized this point. Furthermore, the average weekly working hours in May continued to decrease, reaching 34.3 hours. The job vacancy rate for May was calculated at 4.7%, which is the lowest since December 2020.

Yes, as I mentioned several times before, we are talking about how if the job offer rate falls below 4.5, the unemployment rate could rise significantly. This is about the Beveridge Curve. If you refer to past videos for a basic understanding of the Beveridge Curve, the US Beveridge Curve has generally been upward sloping. Currently, as you can see, this black line represents that even though the job vacancy rate has decreased, the unemployment rate has not risen. However, if it falls further below 4.7, which is the case now, it will follow a pattern where the unemployment rate rises. It means moving backwards in terms of the clock. We are approaching that turning point. If the job offer rate drops a little more, below 4.7, and falls below 4.5, it will be a rising section on the Beveridge Curve. In fact, the Ministry of Finance also recognizes these changes in the employment environment.

Recently, in the economic policy statement, it is estimated that an increase of more than 200,000 jobs is needed to maintain a stable unemployment rate due to the increase in immigration during the pandemic period. This means that after the pandemic, it needs to double. We emphasize that such overall data cannot be considered safe because it is not simply compared to pre-pandemic data and the average. If you look at the challenge report, there were 43,260 employment plans in May, which is the lowest figure since December 23. In addition, the number of layoff plans has decreased for two consecutive months by 6,381 and 16 people. Generally, this trend is evident. The hiring index has dropped to 4.7, which is quite close to the 4.5 point mentioned earlier by the Ministry of Employment and Labor. Now, we need to consider that we are approaching the threshold where the unemployment rate could rise.

The numbers have dropped significantly, and it seems possible to organize them like this. I have mentioned it several times, but the unemployment rate, which includes new unemployment claims and dismissals related to employment data, shows a pattern of overall levels rising and falling according to changes in the job market. Currently, with the prolonged economic downturn, the overall trend is downward. The level of layoffs is also showing a pattern of gradually decreasing compared to the past. Therefore, it can be seen that the current job market is gradually cooling off, but it is difficult to conclude that it is safe. Considering past patterns, it is a time to carefully monitor and prepare for the situation. This is how I think it should be summarized. In May, the number of job changes was examined. In fact, this month, there was an increase to 8.14 million cases compared to the previous month.

It's a bit ambiguous to interpret this as a significant increase because it increased mainly due to the downward adjustment of the previous month. Moreover, there seems to be a pervasive tendency in the market to overreact to short-term fluctuations in this increase alone, which ultimately acts as a factor that only amplifies unnecessary volatility. We should view it this way. I've reviewed the May 9th job report. Thank you.

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