12/28/23 08:45 AM EST

Job Market Vulnerabilities Emerging

Below is a chart and brief excerpt from today’s Market Situation Report written by Tier 1 Alpha. If you’re interested in learning more about the Hedgeye-Tier 1 Alpha partnership, there’s more information here.

Today's chart presents a classic "alligator" pattern. Historically, the S&P 500 has mirrored job openings — as they climb, signaling robust economic growth and optimism, so does the stock market. Recently, however, we've seen a divergence: job openings have dwindled while the S&P 500 has moved higher, encapsulating the peculiar economic landscape of 2023.

Without delving deep into the job openings data collection methodology, it's worth contemplating a few points. Forty states report a 20% rise in year-over-year continued jobless claims, typically a harbinger of recession. The unemployment rate among 16- to 19-year-olds has climbed from relatively low baselines, hinting at mounting challenges for new job market entrants. Moreover, the deceleration in the gig economy, exacerbated by widespread cost-cutting that's leaving many contract workers without renewals, shows that despite the job market's resilience, vulnerabilities are emerging.

Government expenditure remains a crucial counterbalance, with significant outlays anticipated from the CHIPS Act, the Infrastructure Investment and Jobs Act, and ESSER — the latter being the government's educational support in the wake of Covid-19. Over 70% of these sanctioned funds remain unutilized. Specifically, of the IIJA's $350 billion sanctioned through 2025, only $100 billion has been allocated to date.

While we continue to monitor and adhere to our models and processes, the market continues to levitate for now.

Learn more about the Market Situation Report written by Tier 1 Alpha.