Labor Market Turnover Signal

Signal Summary:

• Configuration statement (mandatory): Given a turnover differential of 1.0 and a z-score of -0.48, this setup aligns with Indeterminate price paths and Indeterminate volatility, where the dominant risk is Data uncertainty, not Regime shift. (1)
• The signal has entered a Neutral regime as of January 2026, indicating balanced labor flows or a transitional state. (1)
• Conviction Band: Medium; Interpretation Confidence: Mixed Signals; Internal Conflict Flag: No. Signal Stability Assessment: Volatile; Threshold Proximity: Near; Revision Sensitivity: High.

Methodology Applied:

• Regimes are defined by the Turnover_Diff_pp level and Turnover_Diff_z; a z-score between -0.50 and 0.50 signifies a Neutral state. (1)
• Bearish regimes are triggered if the z-score falls below -0.50, implying rising firm retrenchment. (1)
• Labor Market Turnover Signal: latest observation 2026-01-01. (1)

Key Dynamics:

• The primary driver is the stabilization of Quits at 2.0% and Layoffs at 1.0%, resulting in a 1.0pp differential. (1)
• Momentum shows a slight recovery from the Bearish classification in December 2025. (1)
• Conditional Invalidation: A decline in the z-score below -0.50 (currently -0.48) would revert the signal to Bearish. (1)
• History suggests low persistence, with the signal frequently alternating between Bearish and Neutral regimes throughout 2025. (1)

Scenario Balance:

• Base case dominant; risks balanced due to the proximity of the Bearish threshold.
• Upside risk: Strengthening worker confidence if QuitsRate rises above 2.2% while Layoffs remain low.
• Downside risk: Recessionary warning if the LayoffRate increases, pushing the z-score deep into negative territory.

Time Horizon & Aggregation:

• Time Horizon: Cyclical (months); the methodology describes this as a slow-moving confirmation pillar for labor health. (1)
• Aggregation Weight Hint: Medium; relevant for confirming broader business cycle shifts but susceptible to noise.

Macro Relevance:

• Informs the US Labor Market dimension, specifically measuring the net balance of power between employees and employers. (1)
• Economic mechanism: Measures labor market slack and worker confidence; rising values imply expansion, while falling values signal retrenchment. (1)
• Cycle position: Not determined.

Regime Context:

• Newly entered Neutral regime following a single-month Bearish dip; the transition appears to be stabilizing. (1)
• Regime duration: 1 month.

Model Limitations:

• Significant annual revisions and a one-month reporting lag. (1)
• Noisy monthly prints require multi-month moves for high-conviction shifts. (1)

Data & References:

• Labor Market Turnover Signal: 2026-01-01. (1)
• Most influential: Turnover_Diff_z (-0.48). (1)
• External validation: Job Openings (JTSJOL) and Unemployment Rate (UNEMPLOY). (1)