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- Location Strategy Chartbook 060824
Location Strategy Chartbook 060824
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LOCATION STRATEGY CHARTBOOK
This weeks jobs report was very strong, showing 272,000 jobs added in May 4 standard deviations ahead of forecasts. It’s very likely this report will be revised downward significantly because (1) there is a 680,000 jobs gap between the establishment and household surveys the BLS uses to calculate these numbers.

This means that the “employment” numbers in the Household survey is lagging the “jobs” in the Payroll survey by a cumulative 9 million jobs since the start of the pandemic.

Part of the problem is the low response rate to BLS surveys; the other is the BLS uses a “birth-death” model which estimates the spread between jobs created by business openings and jobs lost by businesses closings. Some 56% of the jobs reported by the BLS over the last year are a statistical artifact of the model - rather than actual data. This puts the real job creation number probably closer to 130K per month - meaning the BLS is on track to over estimate job growth by almost 1 million jobs in 2024.

For more than a year, Location Strategy has been forecasting economic weakness in Q2 of 2024, with the expectation that growth would resume later in the year. These reports are coming a little later than we thought and may spill into Q3, but again largely what we expected.
Even if forecasts are accurate, the job growth since then has been in part-time jobs, which have increased by more than 1.5 million since May 2023

The Quarterly Census of Employment and Wages also suggests that the BLS model is overstating job growth.

Here is another visualization of the labor composition in the past year: 1.2 million full-time jobs have been lost, replaced by 1.5 million part time jobs!

The market is still pricing in two rate cuts this year. It will be a battle between the political needs of the campaign and the requirements of the Fed to see responsiveness to monetary policy to see if that actually happens.

Why the low grocery inflation feels higher:


Weaker construction spending, combined with softer consumer spending on goods, pulled the Atlanta Fed’s GDP tracker further down (lowering the “fixed investment” component). The indicator is now below 2% (annualized).

The NFIB small business survey signals slower job growth ahead.

Job openings declined significantly in March and April, suggesting an easing of labor market imbalances. The April figure was below forecasts.

Labor productivity at the largest US firms has been increasing.

The ratio of job openings to unemployed persons is near pre-COVID levels.

Here are the components of private residential spending (% of total).

Mortgage applications remain at multi-year lows.

Texas has returned to pre-pandemic levels of housing inventory.

I guess Millennials haven’t been left out after all; 80% have a mortgage rate at or below 5%.

Homebuyers are increasing the share of mortgages with a rate over 6%. Today 14% of mortgages are over that rate.

Multifamily starts are increasingly being delayed - interest rates are too high for projects to start construction.
