Job Flows Signal

Signal Summary:

• Configuration statement: Given negative Net Job Creation of -321.0 and a Composite z-score of -0.6536, this setup aligns with Transition-biased price paths and Normal volatility, where the dominant risk is Regime shift, not Short covering.
• The signal currently resides in a NEUTRAL regime, though it has deteriorated significantly from its 2024 peak toward the "COOL" threshold (1).
• Conviction Band: Medium; Interpretation Confidence: High Confidence; Internal Conflict Flag: No. Signal Stability Assessment: Deteriorating; Threshold Proximity: Near; Revision Sensitivity: Moderate.

Methodology Applied:

• Regime classification uses an unsmoothed composite z-score where HOT > +0.75 and COOL < -0.75 (1).
• Weights are assigned to Gross Job Gains (0.40), Net Job Creation (0.40), and negated Gross Job Losses (0.20) (1).
• The signal uses quarterly BLS Business Dynamics Statistics (BDS) to capture firm-level hiring dynamism (1).
• Latest observation date: 2025-06-30 (1).

Key Dynamics:

• The dominant driver is the move into negative Net Job Creation (-321.0), the lowest reading in the provided series (1).
• Momentum is negative, with the Composite z-score falling from -0.158 in Q4 2024 to -0.653 in Q2 2025 (1).
• Labor Dynamism (4Q MA) has reached a cycle low of 63.25, indicating reduced structural churn (1).
• Conditional Invalidation: A reversal in Net Job Creation or a Composite z-score crossing above +0.75 (1).
• Deteriorating persistence is evident as the signal has trended downward for three consecutive quarters (1).

Scenario Balance:

• Base case dominant: Continued NEUTRAL state with a high probability of entering the COOL regime if Net Job Creation remains negative.
• Upside risk: Stabilization of Gross Job Gains above 7,700, potentially returning the signal to a mid-Neutral level.
• Downside risk: A further decline in the Composite z-score below -0.75, confirming a "COOL" regime shift and rising slowdown risk.

Time Horizon & Aggregation:

• Time Horizon: Cyclical (months); quarterly data frequency captures medium-term labor market structural shifts.
• Aggregation Weight Hint: Medium; serves as a critical leading indicator for the broader labor cycle when combined with high-frequency payrolls.

Macro Relevance:

• Informs the US Labour Market dimension by measuring firm-level hiring and firing dynamism (1).
• Economic mechanism: Waning churn and negative net creation imply a loss of firm-level resilience and emerging slack (1).
• Cycle position: Not determined, though proximity to COOL suggests late-expansion vulnerability (1).
• Typical interaction: High synergy with payroll breadth and unemployment duration signals (1).

Regime Context:

• The NEUTRAL regime has persisted for seven quarters but is currently weakening toward a transition (1).
• Direction of change: Weakening/Deteriorating.

Model Limitations:

• Uses quarterly frequency which may lag monthly payroll inflections (1).
• Dependent on BLS BDS revisions which can be substantial (1).

Data & References:

• Datasets: BLS Business Dynamics Statistics (BDS) Gross Job Gains and Losses (2025-06-30) (1).
• Influential data: Net Job Creation (-321.0) and the Composite z-score (-0.653) (1).
• Suggested additions: Sectoral Employment Diffusion Signal and Unemployment Rate data.