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Takeaway: While the market is taking a "bad news is good news" approach, the reality is that the labor market is slowing down.

U.S. Jobs Signaling Late-Stage Risk - Jobs cartoon 06.05.2015

Last Friday's weak non-farm payrolls report was the most important takeaway on the week. Surprisingly, it had only a nominal impact on many of the risk metrics we track. This was likely because the market took the bad news as a sign the Fed won't move on interest rates in June.

To be clear, the paltry 38,000 jobs added in May was the lowest NFP reading since September 2010. Even if you add back the approximately 35,000 striking Verizon workers, the "real" number was still sub-80K -- that's obviously well below potential and weak by any reasonable measure.

Bottom line? Coupled with the 60,000 downward revision to March/April NFP ... and the now growing (Y/Y) trend in initial jobless claims... the U.S. labor market mosaic is increasingly comporting with our cycle twilight narrative.

Watch U.S. Macro analyst Christian Drake discuss the “Labor Market Conditions Index” which just posted its 5th straight month of negative reading (worse since '09) and what it portends for Fed policy.