Morning Report: More evidence of a weakening labor market

Posted on June 5, 2025 by Brent Nyitray

Vital Statistics:

Stocks are flattish this morning on no real news. Bonds and MBS are up.

Home prices rose 1.4% quarter-over-quarter and 4.2% year-over-year according to the Clear Capital Home Data Index. The Northeast performed the best on a YoY basis, increasing 1.8% QoQ and 7.3% YoY, while the South performed the worst, where prices rose 0.8% QoQ and 2.1% YoY.

The Clear Capital Home Data Index is based on a repeat-sales methodology and a price per square foot model. It is faster than the competing indices like Case-Shiller and FHFA.

In the accompanying commentary, I discuss a couple major trends that are affecting real estate prices. Check it out.

Economic activity declined from late April to early June, according to the latest Fed Beige Book. It looks like about half the districts reported a decline, while 3 reported no change and reported growth. Employment was weaker: “All Districts described lower labor demand, citing declining hours worked and overtime, hiring pauses, and staff reduction plans. Some Districts reported layoffs in certain sectors, but these layoffs were not pervasive”, while prices rose moderately. Most districts expected prices to accelerate upward due to tariffs.

Wells reported that the Fed has removed the cap on asset growth imposed in 2018. “The Federal Reserve’s decision to lift the asset cap marks a pivotal milestone in our journey to transform Wells Fargo. We are a different and far stronger company today because of the work we’ve done,” said Wells Fargo CEO Charlie Scharf. “In addition, we have changed and simplified our business mix, and we have transformed the management team and how we run the company. We have been methodically investing in the company’s future while improving our financial results and profile. We are excited to continue to move forward with plans to further increase returns and growth in a deliberate manner supported by the processes and cultural changes we have made.”

More evidence of a weakening labor market: job cuts rose 47% compared to a year ago. They fell on a MOM basis compared to April however. “Tariffs, funding cuts, consumer spending, and overall economic pessimism are putting intense pressure on companies’ workforces. Companies are spending less, slowing hiring, and sending layoff notices,” said Andrew Challenger, Senior Vice President of Challenger, Gray & Christmas.

Government spending decreases (i.e. DOGE) remains the biggest reason for job cuts.

Separately, initial jobless claims rose to 247k last week, above expectations.

Filed under: Economy | 21 Comments »