The ADP Research Institute reported that the U.S. economy created only 156,000 jobs in April. Not only did that miss forecasts for around 200,000 by a mile, but it was also the worst reading in three years!
Manufacturing lost another 13,000 jobs after shedding 3,000 the month before, while virtually every other major industry showed a deceleration in hiring.
The Labor Department said initial jobless claims surged 17,000 to 274,000 in the week ended April 30. That was the single-biggest weekly jump going all the way back to January 2015!
The outplacement firm Challenger, Gray & Christmas reported a whopping 65,141 layoffs in April. That was a 35% surge from March. The year-to-date tally of corporate job cuts is now running at over 250,000, the most going all the way back to 2009.
|Worrying signs from the job market.|
We won’t get the “official” monthly jobs data until tomorrow morning. The government’s numbers never track private reports exactly, what with seasonal adjustments and other massaging that goes on. But none of this looks encouraging to me.
It also isn’t SURPRISING to me. You see, I’ve been talking for a while now about the major credit-market turn began last summer. And I’ve been talking for a while now about the major economic-growth turn that began in the last few months. Now, I believe the labor market is making ITS next major turn – from falling claims and rising job creation to rising claims and falling job creation.
A key reason: This is no longer just an energy story. That’s where the layoffs were the worst in the PAST. But in the FUTURE, they’re going to spread to many other sectors and corners of the economy.
|“Reality at ground level in the jobs market looks a lot different.”|
Heck, that’s already starting to happen now, according to Challenger’s CEO. He said today that: “We continue to see large-scale layoffs in the energy sector, where low oil prices are driving down profits. However, we are also seeing heavy downsizing activity in other areas, such as computers and retail, where changing consumer trends are creating a lot of volatility.”
I have no doubt we’ll continue to hear happy talk from Wall Street and Washington about how the economy is chugging right along. But reality at ground level in the jobs market looks a lot different.
Who’s vulnerable if I’m right? Staffing and placement firms would be at the top of my list. It’s no coincidence that shares of Robert Half (RHI) just tanked by the most in seven years, a move that came amid worries about slowing earnings growth and job-placement rates there.
Shares of the executive search and recruiting firm Korn/Ferry (KFY) have been struggling for some time, too, losing more than 17% of their value year-to-date. Another staffing company I’ve been eyeing for a while looks poised on a knife’s edge, too.
If you’re interested in learning more, including how to protect your wealth – and profit – from a major turn in the employment market, you can check out my All Weather Trader service.
In the meantime, what are your thoughts on the jobs market? Is it still humming along, or grinding to a halt? If you own your own company, are you staffing up here or cutting back? Or if you work at a major firm, what’s happening there on the employment front? Please share any relevant comments or observations below.
Meanwhile, what’s going on with Puerto Rico’s debt situation? How would a default impact the markets? Is the latest economic data good, bad, or just plain ugly? Several of you weighed in on those topics in the past few days.
Reader Jim said: “Is Puerto Rico the canary in the coal mine? Their debt may be around $70 billion, but isn’t this used as collateral for other obligations like derivatives? The actual dollar amount of risk here could be huge. This is a very dangerous situation.”
Reader G13Man added: “‘If Puerto Rico doesn’t have to pay, why should Greece?’ they will say. Then all the dominoes will fall because
why should anyone pay if the governments do not pay?”
On the economic front, Reader Chuck B. commented on the weak trade data that came out: “Imports shrank over five times as much as exports, but they both shrank, which is not good news on either side of the border. Import shrinkage implies smaller demand, therefore lower economic activity in this country.
“Export shrinkage could be because American prices are too high for foreigners’ tastes, or because of smaller demand in other countries, etc. Not good either way.”
Finally, Reader Mike C. offered this take on the markets: “I was just stop-lossed out of all my holdings. I have the same gut feeling that I developed in August 2007 after the realization that little in the markets was making sense. This new gut reaction has the same feeling, but the reasons this time are much more grave.
“There’s barely an economic or financial stat out there that I trust and that is looking good. And the notion of 20 trillion dollars in debt (shortly) – and no sensible way to get out of that ridiculous problem without bouncing the country/our citizens/investors on their heads — is the icing on this (apparently) poisonous cake that has been baked.”
Thanks for weighing in. If you’re looking for an indication of whether Puerto Rico’s problems will hurt the broader municipal bond market, I’d keep an eye on the VanEck Vectors High-Yield Municipal Index ETF (HYD). Right now, it’s getting carried higher along with virtually every yield vehicle thanks to ZIRP and NIRP policies. But if credit concerns spread from PR to other states or municipal-funding vehicles, HYD will start sinking sharply in price.
As for the broader markets, I got incredibly cautious in the services I manage last summer – BEFORE the August meltdown. I also helped subscribers rack up substantial gains during both of the subsequent plunges, in the fall and in early 2016.
I still don’t believe we’ve seen the last of the turmoil, especially given the deterioration in the U.S. economy that’s getting too big to ignore. So I see no reason whatsoever to flip back to the bullish side of the markets here.
Let me know if you agree or not in the discussion section. You’ll find it just below this column.
First, it was European politicians who admitted the European Central Bank’s efforts to spur inflation were an utter failure. Now, it’s the ECB itself. The central bank issued a new forecast that acknowledged “underlying inflation has not gathered upward momentum since last summer,” despite 14 months of massive QE. Yet the hocus-pocus pushers here and abroad continue to tell the world their efforts are “working.” Right.
Remember that huge speculative bubble in Chinese commodity markets? The one that was spurred by more easy money there, and that resembled the exact same bubbles we saw in Chinese real estate a couple years earlier, and Chinese stocks last year? Yeah, it’s dead already.
Bloomberg notes that Chinese futures trading volume has collapsed by half, after surging as high as $261 billion a single day in mid-April. The speculative frenzy drove up the price of everything from eggs to steel rebar to hard-coking coal to cotton.
Donald Trump’s path to the Republican nomination is clear, now that both Ted Cruz and John Kasich have dropped out of the race. But many Republicans are still struggling with the idea of falling in line behind their candidate, according to The New York Times. Another noteworthy fact: Both Trump and the presumptive Democratic nominee Hillary Clinton are carrying some of the highest negative-perception ratings of any modern presidential candidate.
So even central banks are admitting that QE is a failure – what do you think of that? Does the latest surge and plunge in the asset markets in China mean anything for our domestic markets? And what do you think of where the presidential race stands at this time? Hit up the comment section below and let me know.
Until next time,