Any way you cut it, today’s jobs report was ugly. Starting at the top, where the July print of just 73K missed most estimates…
… and when combined with the massive downward revision of May and June which removed nearly 260,000 jobs…
… meant that the employment growth in the past 3 months has averaged a paltry 35,000, the worst since the covid pandemic.
While the unemployment rate was unchanged at the headline level, the unemployment for blacks surged to the highest since October 2021.
It wasn’t just the headline (Establishment Survey) data that was ugly: looking deeper reveals more rot, such as the plunge in the number of employed workers tracked by the Household survey.
The qualitative component was also ugly, with full-time jobs tumbling 440K to 134.837 million, while part-time jobs surged by 237K to 28.437 million.
And yet, amid all the ugliness, there was one saving grace and some may call it quite critical.
Recall, that starting back in in 2023 we warned that virtually all the job creation since 2018 had gone to foreign-born workers, which as Wall Street subsequently reported, was mostly illegal aliens.
Here’s a better one: since the covid crash, all new jobs – over 2 million – have gone to foreign-born workers. And in May, native-born workers tumbled again, by 369K, while foreign-born jumped 297K to an all time high.https://t.co/rS7nTNN3dy https://t.co/7WcdPtgJCt pic.twitter.com/1HGaZZBS01
— zerohedge (@zerohedge) June 3, 2023
Subsequently, we also correctly predicted that the debate of legal vs illegal workers (and immigration in general) would be the biggest political talking point into the 2024 election.
How is this not the biggest political talking point right now: since October 2019, native-born US workers have lost 1.4 million jobs; over the same period foreign-born workers have gained 3 million jobs. pic.twitter.com/Z5HVWmQ24C
— zerohedge (@zerohedge) January 15, 2024
Which brings us to today when the one aspect of today’s jobs report which got zero mentions, was perhaps also the most important one: namely the ongoing purge of all illegal workers from the payrolls.
As shown in the chart below, in July, the number of foreign born workers tumbled by 467K. It wasn’t just July though: as shown below, foreign-born workers (which, again, are mostly illegal aliens) have declined four months in a row…
… as Trump unleashed an unprecedented crackdown on all illegal workers.
What about native workers? Well, as the chart above shows, in July native-born workers increased by 383K, which was impressive but was less than half the remarkable 830K increase in June; both however were below the massive $1.04 million increase in April.
And while regular readers are well aware, it may come as a surprise to many that in the five years after 2019, the US had not added a single native-born worker, and instead all the growth in the US labor force was foreign-born. But that finally changed in the past 6 months, since Trump’s inauguration.
Here’s the bottom line: since Trump took over, foreign-born workers have declined 5 out of 6 months, while native-born have increase 5 out of 6 months!
The chart above, more than any other variable, explains what is going on with the labor market: millions of minimum-wage illegal workers are not only not applying for jobs, but are actively losing their jobs. In the process, wages are increasing on average (since low-paying workers are no longer entering the work force and are being replaced with higher paid native workers). Indeed, we could see that today because while the overall report was very weak, average hourly earnings not only rose sequentially, but printed higher than expected.
But since there is less supply of native-American workers compared to the torrent of foreign-born illegals that defined the Biden administration, the US labor market has hit a bottleneck. And the only thing that will lift that bottleneck is when employers – who clearly still need workers, just not American workers – start paying higher wages.
The only question then will be whether the modest increase in inflation (due to higher wages) will be worth the drop in asset prices, as an increase in overall wages and spending will likely result in a stronger economy. And while we know Wall Street – whose net worth is tied not in income but assets – will hate that outcome, we are also confident which outcome Main Street will prefer.
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