Markets
Visualized: The State of the U.S. Labor Market
Visualized: The State of the U.S. Labor Market
This was originally posted on Advisor Channel. Sign up to the free mailing list to get beautiful visualizations on financial markets that help advisors and their clients.
The last time the U.S. labor market was this strong was in 1969.
Unemployment fell to 3.3%, incomes were soaring to historic levels, and inflation was rising at a fast clip. Like today, the Federal Reserve was tightening monetary policy to stifle inflation. Yet much of the wage increases were washed out by rising consumer prices.
The above graphic looks at the industries driving today’s robust job market using data from the Bureau of Labor Statistics. Later, we look into the impact on inflation, and whether today’s market can be sustained.
What is Driving the U.S. Labor Market?
Broadly, service-led industries witnessed the highest share of job growth in January.
Still, as the table below shows, a key part of the services sector—leisure and hospitality employment—remains under pre-pandemic levels. A similar trend is seen in retail services.
Rank | Industry | Job Growth Jan 2023 | Job Growth Since 2020 |
---|---|---|---|
1 | Leisure and Hospitality | 128K | -495K |
2 | Education and Health Services | 105K | 361K |
3 | Professional and Business Services | 82K | 1,475K |
4 | Government | 74K | -482K |
5 | Retail Services | 30K | -37K |
6 | Construction | 25K | 276K |
7 | Transportation and Warehousing | 23K | 955K |
8 | Manufacturing | 19K | 214K |
9 | Other Services | 18K | -121K |
10 | Wholesale Trade | 11K | 148K |
11 | Financial Activities | 6K | 245K |
12 | Mining and Logging | 2K | -55K |
13 | Utilities | -1K | 8K |
14 | Information | -5K | 211K |
Adding 1.5 million jobs since 2020 is professional and business services, the highest overall. This sector covers legal, accounting, veterinary, engineering and other specialized services.
We are also seeing strong gains in transportation and warehousing. Last year, the sector added an average of 23,000 jobs, totaling almost 955,000 over the course of the pandemic. Today, trucking jobs exceed 2019 levels and warehouse employment is roughly 50% higher.
Although manufacturing hasn’t seen the highest gains, the sector has one of the lowest unemployment rates across job sectors, at 2.4%. Yet the industry faces an acute labor shortage—if every skilled unemployed worker were to fill open job vacancies, a third of jobs in durable manufacturing would remain open.
Cooling Wage Growth
Despite rock-bottom unemployment numbers, wage growth is slowing. In January, it fell to 4.4% annually, down from a multi-decade high of 5.9% in March last year.
At the same time, wage growth falls below inflation by about 1%.
Wage growth is carefully watched by the Federal Reserve. Typically, their annual wage growth target is 3.5% to be compatible with 2% inflation.
In the current environment, this wage growth trend serves as a double-edged sword. As wage growth slows, workers are less likely to see wages keep up with inflation. On the other hand, slower wage growth could help prevent inflation from rising in the first place—and interest rates from climbing higher.
Where is the Job Market Heading?
The question on everyone’s minds is whether today’s job market will stay resilient.
According to Fitch Ratings, slowing aggregate demand in response to higher interest rates will begin to weigh on the U.S. labor market, and the 517,000 new jobs created in January—three times the level expected by analysts— won’t last long.
Eventually, both higher borrowing costs and elevated compensation costs could weigh on corporate profits. On the other hand, the pandemic has changed the labor market. Relief legislation may continue to buoy the job market and workers may also remain scarce as people retire or leave for other reasons.
Given how unemployment serves as a lagging indicator, the material effects in the economy will likely appear before cracks begin to show in the U.S. labor market.
Stocks
Will Tesla Lose Its Spot in the Magnificent Seven?
We visualize the recent performance of the Magnificent Seven stocks, uncovering a clear divergence between the group’s top and bottom names.
Will Tesla Lose Its Spot in the Magnificent Seven?
This was originally posted on our Voronoi app. Download the app for free on iOS or Android and discover incredible data-driven charts from a variety of trusted sources.
In this graphic, we visualize the year-to-date (YTD) performance of the “Magnificent Seven”, a leading group of U.S. tech stocks that gained prominence in 2023 as the replacement of FAANG stocks.
All figures are as of March 12, 2024, and are listed in the table below.
Rank | Company | YTD Change (%) |
---|---|---|
1 | Nvidia | 90.8 |
2 | Meta | 44.3 |
3 | Amazon | 16.9 |
4 | Microsoft | 12 |
5 | 0.2 | |
6 | Apple | -6.7 |
7 | Tesla | -28.5 |
From these numbers, we can see a clear divergence in performance across the group.
Nvidia and Meta Lead
Nvidia is the main hero of this show, setting new all-time highs seemingly every week. The chipmaker is currently the world’s third most valuable company, with a valuation of around $2.2 trillion. This puts it very close to Apple, which is currently valued at $2.7 trillion.
The second best performer of the Magnificent Seven has been Meta, which recently re-entered the trillion dollar club after falling out of favor in 2022. The company saw a massive one-day gain of $197 billion on Feb 2, 2024.
Apple and Tesla in the Red
Tesla has lost over a quarter of its value YTD as EV hype continues to fizzle out. Other pure play EV stocks like Rivian and Lucid are also down significantly in 2024.
Meanwhile, Apple shares have struggled due to weakening demand for its products in China, as well as the company’s lack of progress in the artificial intelligence (AI) space.
Investors may have also been disappointed to hear that Apple’s electric car project, which started a decade ago, has been scrapped.
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