It’s gotten worse. That’s because we just got an epic disaster of a jobs report for the month of May. The details …
Our economy added only 38,000 jobs last month. That wasn’t even in the ballpark when compared with estimates for a rise of 160,000. It was also the single-worst number since September 2010.
Was May an outlier? Nope. I say that because the Labor Department slashed April’s previously reported gain to 123,000 from 160,000 … and March’s number to 186,000 from 208,000. That confirms that 2016 is showing a marked slowdown in job growth from late 2015 and 2014.
|Will unemployment lines become a more familiar sight in the coming months?|
Job losses weren’t concentrated in any one sector, either. Manufacturing lost another 18,000 … mining lost 10,000 … construction lost 15,000 … and temporary help lost 21,000. The latter figure is particularly troublesome, because as the Wall Street Journal noted recently, a decline in temp hiring preceded the last two major recessions. Is that what we’re seeing yet again?
Yes, the unemployment rate dipped to 4.7% from 5%. But that’s because the American workforce plunged by 458,000, while the labor force participation rate dropped another 0.2 percentage points to 62.6%. Those factors artificially depress the unemployment rate because of the way the math works.
Moreover, the so-called diffusion index that measures how many industry groups are hiring or firing fell to its lowest level in more than six years. Average hourly earnings also rose a lackluster 0.2%, compared with 0.4% in April, while average weekly hours were unchanged at 34.4.
|“It was bad, and I don’t think we’ve seen the worst of it.”|
I don’t care how Wall Street apologists try to spin this report. It was bad, and I don’t think we’ve seen the worst of it. Why?
We haven’t seen the rise in auto layoffs that are coming down the pike as the auto bubble bursts …
We haven’t seen the sharp increase in construction layoffs that I believe is coming because commercial real estate lending is tightening and the out-of-control price bubble there is starting to deflate …
We also haven’t seen the impact of rising tech sector layoffs that the end of the “unicorn” frenzy will cause.
So I can’t stress it enough:
- Maintain a cautious investing stance in stocks, focusing on “Safe Yielders” like utilities, consumer staples, and telecoms.
- Continue to invest in high-quality bonds rather than junky ones (“Treasuries over high yield” for short).
- Watch out for a major break down in the dollar, and hedge against it by buying my favorite currencies … foreign, high-quality bonds … and gold.
Specific names and “buy” and “sell” recommendations, as always, can be found in my Safe Money Report.
Now that I’ve shared my view, what’s yours? Is this jobs report as bad as it looks, or do you see any silver linings in it? What are you seeing “on the ground” in your neighborhood or at your workplace? What does the deceleration in the job market mean for stocks, bonds, currencies, and gold? Make sure you comment on these important issues given the magnitude of today’s news.
Meanwhile, several of you weighed in with your thoughts on the economy and the markets ahead of today’s jobs report.
Reader Larry said: “A bullish trend will begin when government policy restores a demonstrated growth climate. Given our generous natural asset pool, it is only a matter of a few changes in taxing policy, quarantines, and international investment policy that would create the largest industrial renaissance known thus far to mankind.
“But until then, we continue to languish through periods of pessimistic optimism as three decades of money printing have been unable to reverse this cycle.”
Reader Bonnie said: “You speak of the official numbers as if they can be believed. Ha! With so much Fed intervention, the markets are just a dog and pony show as far as I’m concerned.
“I do know one thing for certain: You cannot borrow your way out of debt. It just won’t work.”
Reader Howard added: “Research does show that we are going through a turning point. I know that picking changing events can be difficult. However, there is nothing worse than being unprepared. The ones who scream loudest are usually the ones least prepared.”
Lastly, Reader Mike said: “Money is being printed and borrowed in record amounts. Both feet are on the accelerator, yet the engine is still stalling. The ‘growth’ over the past 15 years has been based on borrowed monies.
“Corporate America has sent our productive assets and incomes to slave wage nations and pocketed the difference. Tax cuts for the wealthy have transferred this borrowed wealth to the top. Housing bubbles, stock bubbles, and bond bubbles have provided the grease for the economic wheels. So we will soon be a third world nation with nuclear arms, a mountain of debt and a debased currency.”
I appreciate everyone sharing their thoughts, and the lousy jobs news clearly shows an economy that’s facing significant challenges. If you have any more thoughts on that news, please make sure you hit up the discussion section to share them.
Should we be worried about “Round Three” of China-driven turmoil? Analysts at Goldman Sachs Group (GS) believe so, given the renewed weakening we’re seeing in the Chinese yuan. The currency is close to setting a fresh five-year low against the dollar – and the last two times the yuan devalued significantly, the stock market tanked (in August-September 2015 and January-February 2016).
I’ve been warning about the looming disaster that our nation’s auto industry faces. Now J.P. Morgan Chase (JPM) CEO Jamie Dimon has thrown his hat into the ring, warning at an investment conference yesterday that auto lenders have gone too far with extending credit. He said “Someone is going to get hurt” as default rates rise, used car prices fall, and repossessions climb.
Ten TRILLION and counting. That’s how much government debt is now trading at a negative yield, according to a new analysis from Fitch Ratings. The tally climbed 5% to $10.4 trillion last month, with bonds issued by France, Germany, Italy, and Japan driving the increase. Yes, it’s ridiculous. Yes, it’s being driven by massive central bank manipulation. And no, I don’t think it’s healthy over the longer term.
Crazy spring weather claimed another round of victims, this time in Texas. Five soldiers died and four others went missing yesterday after rising floodwaters apparently swept away the truck they were traveling in during a training mission at Ford Hood.
So what are your thoughts? Should we be worried about more problems emanating from China? What about the auto sector, and Dimon’s new warning? Any opinions you want to share on the fact more than $10 trillion in government bonds now trade at yields below zero percent? Go to the comment section below and let me hear about it.
Until next time,