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😱 We are SCREWED...

Channel: Steven Van Metre Published: 2025-06-06 17:00
Steven Van Metre

Steven Van Metre argues the May 2025 jobs report is far worse than the headline 139K payrolls suggest — after accounting for 95K in downward revisions to prior months, the "real" number is closer to 40K. He contends the falling labor force participation rate, weakening hours worked, and mounting corporate layoff announcements (P&G, Nissan, Brown-Forman) signal a recession is underway. He believes the Fed is behind the curve, fixated on inflation that is already fading, and that rate cuts — though he supports them — will not rescue the economy. The episode blends macro commentary with a pitch for his momentum-trading service and a GDX trade.

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Detailed summary

Steven Van Metre opens with a stark thesis: "For Trump and the Fed, it's game over. For the American public, the nightmare just began." He builds this around the May 2025 non-farm payrolls report, which showed 139,000 jobs added — but carries 95,000 in downward revisions across the prior two months. His core argument is that the effective payroll gain is roughly 40,000, a number he believes would have triggered a sharply negative market reaction had it been reported cleanly. He walks through several structural cracks in the data. The unemployment rate held at 4.2%, but Van Metre stresses the participation rate fell to 62.4%, a three-month low, with prime-age (25-54) participation also declining. He frames this as people giving up looking for work — not a stable labor market. …

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Main takeaways

  1. May 2025 payrolls of 139K mask 95K in downward revisions — the effective number is ~40K, signaling a rapidly deteriorating labor market
  2. Falling labor force participation (62.4%, three-month low) means unemployment held steady for the wrong reasons: workers are giving up, not finding jobs
  3. Rising average hourly earnings during a slowdown is historically normal — employers give raises to key staff while cutting hours and laying off others
  4. Hours worked, not payrolls or wages, is the critical leading indicator — employers extended hours rather than hiring, and hours cuts are next
  5. Corporate layoff announcements (P&G 7K, Nissan 20K, Brown-Forman, Lululemon) confirm consumer demand is weakening and job cuts are just beginning
  6. The Fed should cut rates now but rate cuts will not rescue the real economy — unemployed and fearful workers do not borrow
  7. Tariffs did not cause an inflation spike because companies absorbed costs, realizing consumers could not afford price increases
  8. Record household debt, credit card delinquencies at post-GFC highs, and rising BNPL late payments set the stage for a financial crisis

Market read by horizon

Short term

Bearish: the labor market is deteriorating faster than the headline data suggests, and falling participation plus looming hours cuts point to a sharp payroll deceleration in the next 1-2 reports. The market's relief rally on the 139K headline is a misread — downward revisions and participation drops will force a repricing soon.

  • The effective May payroll number (~40K after revisions) points to a labor market that is already cracking — expect further downward revisions in coming months that will force a market repricing
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  • Falling participation rate (62.4%) and declining prime-age participation are immediate red flags: workers are exiting the labor force, which will mechanically suppress the unemployment rate and mislead the Fed
  • Employers extended hours rather than hiring, a tactical choice that reverses quickly — watch for hours cuts in the next 1-2 months as the canary for accelerating layoffs
Mid term

Bearish with a policy-error overlay: the Fed will stay on hold too long, fixated on lagging inflation signals while the labor market cracks underneath. Corporate layoffs will accelerate through Q3, consumer delinquencies will keep rising, and rate cuts — when they finally arrive — will fail to stimulate because the credit transmission channel is broken by job insecurity and maxed-out balance sheets.

  • The Fed is likely to remain on hold for at least several more weeks, misreading the unemployment rate while the participation rate deteriorates — a policy error that deepens the coming recession
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  • Rate cuts, when they come, will not stimulate borrowing or spending because consumer balance sheets are already maxed out and job insecurity suppresses loan demand
  • The consumer deleveraging cycle has already begun (credit card delinquencies at post-GFC highs) and will intensify as layoffs spread, creating a self-reinforcing demand contraction
Long term

Structurally bearish: the US economy is entering a balance-sheet recession driven by record household debt, depleted consumer savings, and a demand-destruction cascade that rate cuts cannot arrest. The risk is a financial crisis on par with or worse than the GFC, with global spillovers as the US consumer — the world's demand engine — retrenches.

  • The economy is entering a demand-driven downturn where layoffs shrink paychecks, reduce consumption, and trigger further layoffs — a cascade that persists until a new equilibrium is found well below current levels
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  • The structural vulnerability is excessive household debt at record levels, which makes this downturn potentially deeper than a typical recession and raises the risk of a financial crisis
  • The Fed's dual-mandate framework is ill-suited to this environment: they will fight the last war (inflation) while the real threat (labor market collapse and consumer insolvency) accelerates
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Key claims (5)

0:35
BEARISH US labor market

The actual US non-farm payrolls number is closer to 40,000 when downward revisions are accounted for, indicating rapid labor market deterioration.

The speaker subtracts 95,000 in downward revisions from the reported 139,000 to argue the real number is ~40,000–44,000.

2:30
BEARISH US recession risk

The US economy is headed into a recession as evidenced by falling participation rates and declining hours worked.

The speaker cites falling participation rate (62.4%, three-month low), declining hours, and consumer debt at record highs.

9:50
BEARISH Federal Reserve policy

The Fed is behind the curve and should be cutting rates now because the labor market is deteriorating and inflation is coming down.

The speaker argues the Fed is fixated on non-existent inflation while ignoring falling participation rates and declining hours.

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Assets discussed (7)

GDX (VanEck Gold Miners ETF) — GDX
BULLISH etf

Momentum trade entered May 30, up 6.62% as of the prior close; positioned as a successful momentum signal within the speaker's service

Procter & Gamble — PG
BEARISH stock

Cutting 7,000 jobs as part of restructuring, facing slowing US growth, sales rose just 1%, plans to raise prices in July despite weak consumer demand

Unlock the full asset map (5 more) See all assets mentioned, their directional bias, and the exact reasoning. Unlock asset map

Where this transcript pushes against consensus

  • The speaker subtracts 95K in prior-month revisions from the current 139K headline to arrive at a ~40K 'real' payroll number — this conflates revisions to prior months with the current month's data and is not how economists interpret payroll reports
  • The claim that rate cuts 'won't make a difference' is stated as a contradiction: he argues the Fed should cut rates immediately, then says cuts will not help the real economy — the reasoning for why the Fed should cut anyway (psychology) is thin and unsupported
  • The historical charts showing wage growth rising into recessions are used to dismiss current wage growth as a positive signal, but the speaker does not address whether the current wage-growth path is consistent with previous pre-recession patterns or quantitatively different
  • The cascade thesis (layoffs → lower demand → more layoffs) is presented as nearly deterministic with no discussion of potential offsets: fiscal policy, a trade-war resolution, falling rates boosting housing, or inventory restocking
  • Several corporate layoff announcements are presented as confirming evidence without distinguishing between company-specific restructurings (P&G, Nissan) and macro-demand-driven cuts — P&G's 7,000 job cut is described as part of a 'broader restructuring,' which may have pre-dated tariff and demand weakness

Topics

May 2025 non-farm payrolls analysisLabor force participation rate declineHours worked as leading indicatorFed policy error and rate cut debateCorporate layoffs (P&G, Nissan, Brown-Forman, Lululemon)Consumer debt and credit card delinquenciesTrump tariffs and inflation dynamicsRecession outlook and financial crisis riskMomentum trading / GDX trade pitchWage growth vs. recession historical pattern

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