People are worried about labor market breadth
Did you know that rather than a robust labor market, it's just healthcare catch-up hiring? And it's slowing down?
Sometimes it takes a while, but eventually they come round to seeing it my way.
Jevon-it, an Nvidia prelude
people are worried about labor market depth
diffusion like this? that’s not growth, that’s pre-recessionary
this whole time it’s been Uncle Sam’s immigrant home health brigade? So what happens now?
Who said it better, an unseemly victory lap
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Jevon-it
Well, crisis is averted for at least another day because Nvidia did it’s thing, beating and raising (again).
Rather than spend too much time on what will surely be the focus of what others have to say, I did want to surface one neat chart.
Using “on demand” availability as a proxy for utilization, Nvidia’s H100s became very popular right after Deepseek’s big news:
After hovering around “very available” for the past six months (July-Jan)—in what looked for all the world like an H100 over-supply—availability for rent-a-chip cratered to just ~15% in February.
In other words, taking this at face-value, Deep Seek massively increased demand for compute (almost immediately). Jevon’s Paradox carries the day.
Plus, it’s a clever way of measuring demand.
People are worried about “labor market breadth”
The good and smart folks at Odd Lots featured a guest contribution from Skanda Amarnath, the Executive Director of Employ America.
You see, Mr. Amarnath (now) has some concerns about the purported strength of the labor market. It’s true that unemployment is quite low, but if you look under the hood, you might notice that “job growth” has been quite concentrated in just a few sectors.
You might even say that Healthcare Makes All the Jobs, and even then, most of that job-making is really job-catching-up . . . and now that catch-up is complete (and growth is slowing), it begs the question: what happens next?
Where will job growth come from?
Stop me, if this sounds familiar:
Job growth has been buffered at a topline level by acyclical and countercyclical sectors like state and local government catch-up hiring, healthcare, and social assistance.
Construction is arguably the lone cyclical sector contributing above-trend payroll gains and with homebuilding activity primed to cool further, that tailwind will also be worth monitoring
It turns out that acyclical healthcare is doing all the hiring, and there’s really just one pro-cyclical sector contributing above-trend payroll growth, and that one is is homebuilding, which y’know, is uniquely sensitive to interest rates.
That doesn’t sound great. And new home sales are finally running out of steam? Oh jeez.
Diffusion like this? It’s not growth, it’s pre-recessionary
Indeed, diffusion (i.e. the share of sectors contributing to expansion) is historically low, for an expansionary period.
Despite all the “firing on all cylinders” hokum, labor market breadth has been in freefall since rates started to rise in ‘22-’23:
Typically ~70-80% of sectors contribute to job growth, in contrast to the present, where diffusion has nosed below 60%.
60% on the way down is generally “pre-recessionary” in the series, which would make it the second “pre-recessionary” labor market setup in the past week. Great.
But wait, there’s more!
It’s not just that job-growth is especially narrow for an expansionary period, it’s that job growth is driven specifically by non-expansionary sectors:
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