Labor Market Holds Steady

The recent labor market report shows an unemployment rate of 4.3%, consistent with previous data, and initial claims and layoffs remain relatively low, suggesting the economy is not yet in a recession. However, initial claims typically pick up in the summer months, a trend observed in 2023 and 2024, and anticipated for 2025. While some areas of the labor market show weakness, such as low job openings, others, like hiring, have seen a slight increase. A crucial factor for a recession and the end of a business cycle is lower asset prices. The stock market, currently at all-time highs, aligns with patterns seen in previous midterm years like 2014 and 2018, where new highs were achieved despite periods of weakness. The current market behavior is still following the S&P M2 fractal, which, if it continues, could see a market top in September, similar to 2018. Bitcoin's performance this year indicates relative weakness compared to assets like the NASDAQ and the broader stock market, which are reaching new all-time highs. If the stock market experiences a correction later this year, particularly during a potential secondary window of weakness in midterm years, Bitcoin is likely to decline further, possibly reaching a lower low. Energy stocks, such as XLE, could see a rebound as they often perform well at the end of cycles. Looking at unemployment rates across states, while many are seeing increases compared to six months ago, it's not a nationwide phenomenon as observed in major recessions like 2001 and 2008. This suggests pockets of strength and optimism still exist. The recession risk dashboard remains relatively low, not having exceeded 0.16 since 2020. This dashboard incorporates employment, national income, product production, and business data, with interest rates offering a more forward-looking signal. Total non-farm employment increased by over 100,000, and the year-over-year change is still positive, though nearing negative territory. Total temporary health service employees are also trending upwards. Non-farm private payrolls, according to ADP, have recently shown an upward trend. Overall, labor market data is holding up, with low layoffs and unemployment. However, initial claims are expected to rise into the summer, potentially impacting the unemployment rate. A stock market correction is anticipated in late Q3 or early Q4, which would likely correspond to a Bitcoin drop in the latter half of the year.