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How Will DOGE Cuts Impact Feb's Job Report?

How Will DOGE Cuts Impact Feb's Job Report?

Flows remain normal and bullish for now

Feb 16, 2025
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Best of Twitter/Threads, Analysis & Forecasts
Best of Twitter/Threads, Analysis & Forecasts
How Will DOGE Cuts Impact Feb's Job Report?
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Recap

❌ Hotter than expected CPI and PPI did not end up being bearish for the market—the market might be looking past this slightly hotter inflation print and towards earnings growth. Jobless claims also came in-line at 213K vs 215K expected.

Flows did not shift bearish and continued at normal bullish levels (which surprised me since inflation has been increasing for the past 5 months).

So far, the market is not reacting to this negatively yet as corporate earnings come in strong

✅ Inflation is looking to exceed 2024 levels, but when will the market will start to care?

From Substack post Jan 12th: note since Jan 12th, SPX flows targeting 6000+ have reappeared—my read on Jan 12th was bearish because GEX positioning dropped below SPX 6000 for the first time in months.

New 52-Week Highs vs New 52-Week Lows

  • NYSE New 52-Week Highs: 114 vs New 52-Week Lows: 39

  • Nasdaq New 52-Week Highs: 233 vs New 52-Week Lows: 91


*This my personal blog and is not investment advice—I am not a financial advisor but a random person on the internet who does not have a license in finance or securities. This is my personal Substack which consists of opinions and/or general information. I may or may not have positions in any of the stocks mentioned. Don’t listen to anyone online without evaluating and understanding the risks involved and understand that you are responsible for making your own investment decisions.

Posts of Interest

The Department of Government Efficiency (DOGE) initiative to cut waste by freezing funds and terminating employees extends far beyond the 2.3 million federal employees officially on the government payroll. The ripple effects could be larger than anyone expects, impacting millions more workers and slowing economic activity.

It’s estimated that than 6 million people are employed through federal contracts and grants.

Image
Source: Anna Wong on X

As of mid-February 2025, over 85,000 federal employees have been laid off, primarily targeting probationary workers with less than a year of service. And the Internal Revenue Service (IRS) is preparing to lay off up to 15,000 probationary employees,

A 2020 Brookings Institution report by Paul Light estimated that federal contracts and grants accounted for over 6 million jobs, indicating that for every federal employee, there are approximately 2.6 contract or grant employees. This suggests that the current federal layoffs could potentially jeopardize an additional 221,000 to 510,000 private sector jobs associated with federal contracts and grants.

The government has been contributing about 17,000-46,000 monthly jobs of the total non-farm payroll jobs report. In Jan 2025, the government sector contributed a gain of 32,000 jobs, which is approximately 22.4% of the total nonfarm employment increase for the month.

Additionally, January U.S. retail sales fell -0.9% vs -0.2% expected but the market shrugged this off as well.


Forecast

The flows continue to stay in bullish levels, even after the higher inflation prints; however, the February jobs report looks like an upcoming risk event—as we could see <100k net new jobs being created or potentially even negative jobs growth print due to DOGE.

In addition, we continue to see higher prices on eggs, meat, and gas which means that the next CPI report is not looking promising either.

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© 2025 Jeffrey Chau
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