The Growing Labor Market Gap

Today’s labor market data came in line with expectations. Unemployment held steady at 4.2%.

Economists yawned. Markets – no doubt relieved to have something else to talk about besides the Trump/Musk feud – pushed higher.

But we can’t help but notice a growing gap in the data:

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The government’s employment data looks much stronger than data provided by ADP – the private sector payroll giant. Of course, ADP is basing its data on actual customers, and not making all sorts of seasonal or one-off adjustments.

There may be a case for those adjustments. But with a growing gap that causes the government’s data to look rosier than the private sector – it’s a warning sign.

And with many government job cuts still not showing up in the data – you can’t file unemployment while you’re still on severance – the trend is likely to worsen before it gets better.

Our colleague Andrew Zatlin, the #1 payroll analyst on Bloomberg, has made similar observations – that the trend will start to get worse in the third quarter, and that government revisions will likely start to bring today’s gap down as well.

Until then, mind the gap.

~ Addison

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P.S. There are plenty of moving parts in the economy right now, and we explored several of those trends with Frank Holmes yesterday on Grey Swan Live!

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Today’s labor market data came in line with expectations. Unemployment held steady at 4.2%.

Economists yawned. Markets – no doubt relieved to have something else to talk about besides the Trump/Musk feud – pushed higher.

But we can’t help but notice a growing gap in the data:

Turn Your Images On

There may be a case for those adjustments. But with a growing gap that causes the government’s data to look rosier than the private sector – it’s a warning sign.

And with many government job cuts still not showing up in the data – you can’t file unemployment while you’re still on severance – the trend is likely to worsen before it gets better.

Until then, mind the gap.

~ Addison

Get paid $1,500 to write a two-page story

GET ALL THE DETAILS HERE.

P.S. There are plenty of moving parts in the economy right now, and we explored several of those trends with Frank Holmes yesterday on Grey Swan Live!

As always, if you’re not yet a full-fledged member, you’re missing out on unique, timely, and ultimately critical knowledge about today’s markets.

As always, your reader feedback is welcome: feedback@greyswanfraternity.com (We read all emails. Thanks in advance for your contribution.)

As AI clusters demand more light at every layer — from rack to package — Coherent’s share of that energy pathway increases. The startups illustrate what’s possible; Coherent ensures it happens.

As light enters the data center — step by step, layer by layer — Coherent is the most experienced and scaled name in the field. It carries the light forward.

For decades, Moore’s Law — that the number of transistors on a chip doubles every two years — was the quiet metronome of progress. It defined an era. AI just smashed that clock.

Global data center spending will hit $900 billion by 2028, Kobeissi notes. AI servers are growing at a compound rate of +41%, with the overall market expanding +23%.

Just building the facilities, not including chips or servers, now costs $43 billion a year — up 322% in just four years. There are $40 billion worth of U.S. data centers under construction right now, up 400% since 2022.

For the first time in history, the total value of U.S. data centers under construction will soon exceed office buildings.

More than a metaphor, we’re living through a civilizational shift. The upside Grey Swan event, in our opinion, is that the narrative unfolds without any political interruptions or blowouts in the currency and credit markets.

Technology is a double-edged sword. We’re still living in the long tail of a hard money, capitalist society – and reaping new technologies out of it.

But the destruction of the purchasing power of the dollar stands to create a crisis – and drive investors back to safe havens like gold.