Benjamin Cowen argues the latest labor report is weakening but not yet recessionary, and that the market is confused because payrolls softened while unemployment fell, claims stayed low, and layoffs have not triggered a self-reinforcing downturn. He ties that ambiguity to a broader global easing cycle that has stalled, making Fed policy harder to read and leaving crypto and other risk assets under pressure relative to blue chips. His base case is that the Fed is close to a mistake zone because year-over-year non-farm payroll growth is nearing zero, but he still thinks the business cycle has not ended yet. On the market side, he expects U.S. equities to keep grinding higher for a bit longer before a correction starts by late September at the latest, with the September 16 Fed meeting and midterm-year seasonality as key catalysts.
Benjamin Cowen said the video is centered on the most recent labor market report, its mixed signals, and why the market cannot clearly tell what the Fed will do next.
He said total non-farm payroll expectations were around 80,000, but the actual print was 23,000, a large miss.
He said month-to-month payroll data showed a clear weakening in 2025, with the first negative reading and then several more later in the year, while 2021 through 2024 had essentially no negative month-over-month changes.
He said quarter-over-quarter payroll changes filter out noise, and in that view the series did not go negative until around late 2025.
He said year-over-year payroll growth is not negative now, though it nearly turned negative in February before rebounding.
He said payroll growth was about 5% in 2022, fell through 2023, was around 1% or less in 2024, and is now roughly 2%, leaving very little net job creation.
He said there is not much margin for error and that if the Fed missteps in the coming months or year or two, total non-farm payroll could easily turn negative.
He said the unemployment rate fell from 4.5% last November to 4.1% now, while labor force participation dropped from 62.5% to 61.4%, which helps explain why unemployment fell despite weaker hiring.
He said the weakness is not coming from layoffs: layoffs are up but still basically at pre-pandemic levels, and initial claims printed 189,000, which he said was the lowest in a long time and probably the lowest in about 50 years.
He said job openings have mostly trended down, temporary help had been weak for a long time but recently turned up, and the labor market has pockets of both weakness and strength.
He said some industries already feel like they are in a deep bear market, using altcoins as the example, while AI and semis have held up better even after a correction.
He said the labor picture is highly regional in the United States, with some states seeing higher unemployment and others not, unlike 2008 or 2001 when the whole country was affected.
He said the market keeps climbing the wall of worry because the unemployment problem has not become nationwide, and that a recession looks more like a countrywide event with no silver lining.
He said the GDP-weighted average unemployment rate across the countries he listed has been slowly trending up but has recently stalled and started easing again, which is part of why there is debate over whether the Fed will hike or not.
He said the market is now less convinced of a September rate hike, pricing only about a 43.9% chance, and that another labor report and one or two inflation reports could still change that.
He said the Fed has stalled out in the U.S., while other countries show mixed policy paths: Brazil hiked again after cuts, the euro area and South Korea are raising again, Australia is moving back up, New Zealand may be turning up, Mexico has been going down, and the UK, UAE, and Singapore have stalled.
He said the globally GDP-weighted interest-rate path stalled around 4.6%, fell to about 3.4, and has been trying to move back up, which he thinks is one reason crypto has struggled through this midterm year.
He said the easing cycle has stalled and that the Fed does not want to hike into a slowing economy, especially with total non-farm payroll year-over-year change close to turning negative.
He said the 2-year yield is now above the Fed funds rate at roughly 3.75%, and that the Fed funds rate often chases the 2-year yield; he cited the 1990s as precedent for the Fed following the 2-year higher and then ending the cycle.
He said his recession-risk dashboard has stayed relatively low over the last four years, only getting to about 0.16 risk, and that as long as initial claims stay below 300,000 and the unemployment rate is turning down, he does not consider it recessionary.
He said blue-chip stocks have outperformed riskier names because investors prefer companies they think will survive, and he thinks AI has been supporting the stock market and can keep doing so for a while.
He said Bitcoin dominance remains rising if stablecoins are excluded, and that the recent drop in Bitcoin dominance was really driven by rising stablecoin dominance.
He said his base case for the S&P is continued strength for a bit longer, but a correction starting by late September at the latest, with the September 16 Fed meeting, prior midterm years, and mid-September seasonality all pointing to that window.
He said there is a chance the Fed does not hike and the bond market revolts, or the Fed does hike and investors worry the easing cycle is over, and that a stock-market correction often starts around mid-September with several weeks still potentially left before it plays out.