SUMMARY

ClearValue Investing analyzes the crashing US labor market amid government shutdown, highlighting massive October job cuts, private reports like Challenger and ADP, and implications for Federal Reserve's December interest rate decision.

STATEMENTS

• The US Bureau of Labor Statistics is not releasing the official October jobs report due to the government shutdown, forcing reliance on private sector data to assess labor market health.
• October saw 153,074 job cuts announced by US employers, a 175% increase from the previous year, marking the worst October in 22 years.
• For the first 10 months of 2025, employers announced 1,995,000 job cuts, up 65% from the same period in 2024.
• Key reasons for layoffs include AI adoption, weakening consumer demand, softer corporate spending, rising costs from inflation, and broader economic conditions.
• Technology sector job cuts surged from 5,639 in September to 33,281 in October, while retail saw 88,664 cuts year-to-date, a 145% year-over-year rise.
• Services experienced 63,580 job cuts in 2025 so far, up 62%, and warehousing 90,418, up 378% year-over-year.
• The ADP private payroll report showed a surprise gain of 42,000 jobs in October, offsetting losses in other sectors, though it revised prior data downward.
• Federal Reserve projections from September anticipated a December rate cut, but Chair Jerome Powell emphasized data dependence amid the labor market's weakening and persistent 3% inflation.
• Fed Governor Cook advocates prioritizing labor market support through rate cuts, potentially at the expense of inflation control, while President Goolsbee pushes for focusing on reducing inflation.
• Market expectations via CME FedWatch indicate a 68.7% chance of a 0.25% rate cut in December, slightly down from prior odds due to mixed private data.

IDEAS

• Massive Q4 layoffs signal desperation, as companies typically avoid cuts during holiday seasons to maintain morale and operations.
• AI's rise as the second-leading layoff driver in October underscores how technology is accelerating job displacement even in a weakening economy.
• Private reports like Challenger reveal trends the official data might miss, especially during government disruptions, highlighting the value of alternative metrics.
• The ADP report's surprise job gains mask underlying fragility, as they barely offset record cuts, suggesting a labor market on the brink.
• Federal Reserve's dual mandate creates an impossible trade-off: rate cuts to aid employment risk inflating prices further from the current 3% level.
• Powell's "foggy" analogy for data shortages implies caution, potentially delaying action and prolonging economic pain for workers.
• Year-over-year surges in warehousing and services cuts (378% and 62%) point to supply chain breakdowns tied to consumer slowdowns.
• More companies (450 vs. 400 last year) planning future layoffs indicate a structural shift, not just cyclical downturn.
• Inflation's acceleration toward 3% contradicts the Fed's 2% target, yet labor weakness demands intervention, exposing policy paralysis.
• Government shutdowns amplify economic uncertainty, forcing markets to bet on incomplete data for pivotal decisions like rate adjustments.

INSIGHTS

• Labor market deterioration, driven by AI and inflation, forces the Fed into a bind where supporting jobs may reignite price pressures, undermining long-term stability.
• Private data proxies during official lapses reveal a more dire reality than polished government figures, urging diversified information sources for accurate economic foresight.
• Holiday-season layoffs defy business norms, signaling acute distress that could cascade into broader consumer spending declines and recession risks.
• The Fed's data dependence in foggy conditions prioritizes caution over bold action, potentially sacrificing employment gains for inflation control.
• Sector-specific cut spikes, like in tech and warehousing, highlight how innovation and cost pressures are reshaping the workforce faster than policy can adapt.
• Internal Fed disagreements reflect a philosophical rift: employment maximalism versus inflation hawkishness, with neutral leadership risking indecision.

QUOTES

• "In October, US-based employers announced 153,074 job cuts. This is up by 175% Compared to October of last year."
• "The report cites AI adoption, a weakening consumer, softer corporate spending, and rising costs."
• "We had the worst October in 22 years."
• "It's like when it's foggy then you may want to slow down."
• "They've dropped the ball on both."

HABITS

• Regularly track private sector reports like Challenger and ADP as supplements to official jobs data for comprehensive labor market analysis.
• Monitor year-over-year job cut trends across industries to anticipate economic shifts early.
• Review Federal Reserve projections and press conferences monthly to gauge interest rate policy directions.
• Analyze sector-specific layoff drivers, such as AI and inflation, to inform investment and career decisions.
• Engage with market tools like CME FedWatch to assess probabilities of monetary policy changes.

FACTS

• US employers announced 1,995,000 job cuts in the first 10 months of 2025, a 65% increase from 2024.
• Technology job cuts jumped to 33,281 in October 2025, from 5,639 in September.
• Retail sector has seen 88,664 job cuts in 2025, up 145% year-over-year.
• Warehousing job cuts reached 90,418 in 2025, a 378% year-over-year surge.
• Current US inflation rate stands at 3%, above the Federal Reserve's 2% target, with recent acceleration.

REFERENCES

• Challenger Job Cuts Report (monthly layoff announcements and industry breakdowns).
• ADP Private Payroll Report (monthly private sector employment changes).
• CME FedWatch Tool (interest rate probability tracker).
• Federal Reserve September Projections (anticipated rate cuts for October and December).
• Jerome Powell's October Press Conference (comments on data dependence and caution).
• Book: "Wealth-Building" by ClearValue (English and Spanish versions on Amazon).

HOW TO APPLY

• Monitor Alternative Data Sources: During official data gaps like government shutdowns, subscribe to private reports such as Challenger and ADP to track job cuts and payrolls independently, ensuring you stay informed on labor trends without relying on delayed government releases.
• Assess Sector Vulnerabilities: Review industry-specific layoff figures monthly—focus on tech, retail, and warehousing—to identify at-risk areas and adjust career or investment strategies accordingly, prioritizing sectors with lower cut rates.
• Track Fed Projections and Tools: Use resources like the CME FedWatch Tool to evaluate interest rate cut probabilities before each Federal Reserve meeting, combining this with inflation and employment data to predict policy shifts.
• Balance Dual Mandates in Analysis: When evaluating economic policy, weigh the Fed's price stability and maximum employment goals by comparing current inflation rates (e.g., 3%) against job addition trends, helping you anticipate trade-offs in rate decisions.
• Prepare for Layoff Waves: If in a high-cut industry, build financial buffers by cutting non-essential spending and upskilling in AI-resistant fields, using reports to time job searches away from peak layoff periods like Q4.

ONE-SENTENCE TAKEAWAY

The US labor market's sharp job cuts amid 3% inflation pressure the Federal Reserve to choose between employment support and price control in December's rate decision.

RECOMMENDATIONS

• Diversify information intake by following private economic reports to bypass government data delays and gain a fuller labor market picture.
• Prioritize upskilling in AI-impacted sectors like tech to mitigate personal layoff risks amid rising automation-driven cuts.
• Watch Fed internal debates closely, as splits between employment-focused and inflation-hawkish members could signal policy volatility.
• Build emergency savings now, given Q4 layoff spikes that defy seasonal norms and signal deepening economic weakness.
• Advocate for or prepare for fiscal policies that address root causes like consumer weakening, beyond just monetary rate tweaks.

MEMO

In the shadow of a government shutdown, America's labor market is signaling distress that the Federal Reserve can no longer sideline. With the Bureau of Labor Statistics sidelined, private tallies paint a grim portrait: October alone saw 153,074 job cuts, a 175% surge from the prior year and the worst such month in over two decades. Challenger Gray & Christmas, a leading tracker, attributes this to AI's relentless advance, faltering consumer spending, and inflation-fueled costs—factors compounding into what analysts call a "perfect storm" for workers. Even as holiday cheer looms, companies are slashing positions, bucking traditions of seasonal restraint and underscoring the urgency of the downturn.

Yet, the data tells a mixed tale. The ADP report, surveying private payrolls, logged a modest 42,000-job gain for October, defying expectations of net losses and offsetting cuts in services and manufacturing through hires in transportation and trade. Revisions to prior months, however, temper optimism, revealing a labor force teetering rather than thriving. Year-to-date, cuts have ballooned 65% to nearly 2 million, with warehousing jobs evaporating at a staggering 378% pace and retail enduring 145% more losses. These aren't mere blips; they're structural shifts, where innovation displaces roles faster than new ones emerge, leaving economists to question the sustainability of recent job growth that has dwindled from hundreds of thousands monthly to mere tens.

The Federal Reserve, entrusted with taming 3% inflation while fostering maximum employment, faces its sternest test yet. Chair Jerome Powell evoked fog-shrouded caution in recent remarks, hinting at a slowdown in rate cuts as data fog from the shutdown obscures the path. Market bets, via the CME FedWatch Tool, peg a 68.7% chance of a quarter-point trim on December 10—down slightly from prior odds—aligning with September's projections but far from certain. Internal rifts amplify the drama: Governor Lisa Cook urges prioritizing jobs to avert deeper weakness, even if it risks price spikes, while President Austan Goolsbee champions inflation's defeat above all, warning that easing too soon could unravel hard-won progress.

This dichotomy isn't academic; it's a policy vise grip. Inflation, stubbornly above the 2% target and accelerating, clashes with a jobs picture shifting from robust additions to spiking severance. Powell's neutral dance—data-dependent, perhaps pausing—masks profound disagreement among voters, potentially paralyzing action. If private signals hold, December's cut seems likely, yet the shutdown's void invites caution, much like drivers easing through mist. For everyday Americans, the stakes are visceral: sustained high rates could crush hiring further, while premature relief might inflate living costs anew.

Ultimately, this labor convulsion demands more than monetary tweaks—it calls for addressing AI's disruptive force and consumer fragility head-on. As 2025 closes with more firms plotting cuts (450 plans versus 400 last year), the Fed's December pivot will define not just markets, but the human toll of economic drift. Investors and workers alike should heed these private whispers, for in their clarity lies warning of storms ahead.