The ADP Research Institute just said the U.S. economy added 200,000 jobs in September. That was a small rise from 186,000 in August and slightly above economists’ forecasts.
Market Roundup
Don’t get used to it, though. Because my bold prediction is that this will be the last strong jobs number for a LONG time!
Look, the Federal Reserve continues to believe we can remain a relative island of prosperity in a tumultuous world. So do a lot of mainstream economists and reporters.
Indeed, as soon as the ADP number hit the tape, the CNBC pundits were chattering about how this “proves” the U.S. economy won’t get dragged down. Not by the implosion in overseas markets … the ongoing meltdown in energy … the weakness in manufacturing … or any of the other challenges out there.
But if you look behind the ADP headline, you see that factory employment shrank by 15,000. That was the worst drop in almost five years. Things aren’t going to get much better, either, with U.S. exports poised to decline in 2015. That’s the first time that has happened since the Great Recession.
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| Are we on the verge of more layoffs and weaker employment reports? |
Companies in the energy patch are continuing to fire workers, as evidenced by yesterday’s Chesapeake Energy (CHK) announcement that it would eliminate 15% of its workforce. So are diversified manufacturers like Caterpillar (CAT), which recently announced it would lop up to 10,000 workers off its payroll.
I find it patently ridiculous to assume that rising layoffs, falling exports and reduced hiring won’t impact domestic demand for housing, cars, retail goods and the like. And I believe investors in assets like junk bonds are sniffing out a broader economic slowdown.
Yields are surging to multi-year highs, and prices are falling to multi-year lows there. It’s no longer happening mostly in energy bonds, either. The pain is spreading to a wider and wider swath of bonds in other industries and sectors.
Bottom line: A major ECONOMIC turn may be at hand, rather than just a major MARKET turn. If I’m right, the figures we got out of ADP today … and that we’ll get out of the Labor Department on Friday … are going to be the best you’ll see for some time.
That’s another factor that should weigh on stock prices going forward. So be sure you continue to stay cautious and defensive when it comes to investing strategy.
| “Investors in assets like junk bonds are sniffing out a broader economic slowdown.” |
Now I’m interested in hearing what you think. Is the overall job market going to deteriorate from here?
Or will strength in services and domestically-focused business offset weakness elsewhere? Should you place more “recession-style” bets? Or do you think investing for stronger U.S. growth is a better play? Head over to the Money and Markets website and share your answers with me and your fellow investors.
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Global stocks caught a bit of a reprieve yesterday and overnight. But that didn’t seem to convince many of you we’re in for better conditions ahead.
Reader Calabro said: “I believe we are in a deflationary cycle. It has been proven over and over again that during the boom period, especially when interest rates are at low levels, investors tend to borrow and over-invest, especially in the capital goods part of our economy.
“When the yield curve flattens, people begin to start paying down debt by selling other assets. Depending on the amount borrowed, these other assets are sold at fire sale prices. This process spreads like a contagion, which as you well know, is known as bad deflation. The Fed will try to fight this by printing more money. It will not work. The market must be allowed to clear itself of its mistakes.”
Reader Books said: “With safe savings earning nothing for years, many retirees are using up their savings. Now with market gyrations and advice to be in cash, our money is not growing to keep up with the cost of living.
“Despite talk of deflation – groceries, prescriptions, utilities, car costs, etc. continue to rise. Many retirees have been helping their adult kids and grandkids due to job losses, low wages, etc. This does not bode well.”
Reader Tom3451 added: “With velocity of money at an all-time low, and the labor participation rate at a 38-year low, watch out below.”
Finally, Reader Fred 151 said: “This Glencore thing could really spread. Reportedly they are having serious credit problems, sorta like Lehman. With no credit, companies die. Many companies in the Great Depression were in good shape. They just could not make regular payroll because there was NO credit for even such small costs.”
I appreciate the feedback. You’re absolutely right that credit is essential to the functioning of any economy, and that’s why the large deterioration in the junk bond market is so important. That weakening is now beginning to spread to higher-rated corporate debt, albeit with less intensity.
None of this is bullish for equities, nor is the resurgence of deflationary pressures in Europe, Japan and elsewhere. So I agree with you – this is a time to buckle up and invest for safety rather than aggressive growth!
Keep those comments coming at the website when you get a chance. Here’s the link to get you started.
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The obvious failure of QE to work anywhere in the world was once again laid bare for everyone to see, with Europe reporting today that consumer inflation dropped 0.1% in September. That was the first negative print in six months, and it comes despite a massive $1.2 trillion QE program from the European Central Bank. Japan also just slipped back into deflation, with prices falling 0.1% in August despite a ridiculously large amount of QE from the Bank of Japan.
One problem going forward could be an economic slowdown on the Continent. Germany reported a 2,000-worker rise in unemployment in September, compared to expectations for a decline of 5,000. The unemployment rate held at 6.4% in Germany, better than the Eurozone-wide unemployment rate of 10.9% in August.
Turmoil in the Middle East and South Asia is picking up again. American fighter planes launched another round of airstrikes on Taliban forces in an effort to help Afghan troops keep them from overrunning more territory in the northern city of Kunduz.
Meanwhile, Russia’s Parliament approved the use of force in Syria in support of leader Bashar al-Assad. That could lead to Russian airstrikes in the country even as the U.S. and other allied nations are bombing ISIS targets in the region.
Hurricane Joaquin is strengthening and potentially headed for a strike on the U.S. East Coast. The hurricane is moving toward the Bahamas, but is expected to turn toward the north in a day or two and head toward the eastern Seaboard somewhere from North Carolina northward.
Is Europe’s economy in trouble, and what does that say about the success or failure of Euro-QE? What do you think about the ongoing turmoil in the Middle East, and the possibility of Russian and U.S. warplanes conducting bombing runs practically side-by-side? Let me know over at the website.
Until next time,
Mike Larson
Mike Larson graduated from Boston University with a B.S. degree in Journalism and a B.A. degree in English in 1998, and went to work for Bankrate.com. There, he learned the mortgage and interest rates markets inside and out. Mike then joined Weiss Research in 2001. He is the editor of Safe Money Report. He is often quoted by the Washington Post, Reuters, Dow Jones Newswires, Orlando Sentinel, Palm Beach Post and Sun-Sentinel, and he has appeared on CNN, Bloomberg Television and CNBC.
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I have been researching 5,000 years of history for close to fifty years, not in any university, because they demand specialization. My conclusion is that we are at the end of the third cycle. In previous cycles, this has meant the complete collapse of civilization and all governments, except for one. During the first cycle, ca. 1200 B.C. Egypt was conquered and its civilization went into decline, because the conquerors were ignoranuses, and incapable of maintaining the level of civilization Egypt had attained. At about the same time the empires of the Hittites, Assyria, Babylon, the Mycenaean Greeks and even China completely collapsed and the societies were ruled by warlords. When Rome collapsed during the fifth century A.D., the empires of Persia, India, the Arabs collapsed, and China was conquered by the Mongols. Since 1898, the empires of Spain, the Turks, Austria, Germany (twice), Japan, the British and the Soviets have all collapsed. Only one empire in history has endured beyond the end of a cycle, the Byzantines, because around 1100, the Emperor Alexios I restored 100% gold coinage, and his empire endured until 1450 when it was conquered by the Turks.
This should provide us with an important economic lesson. Switching back to the gold standard will not be painless, but tii is important for the future of our civilization and our way of life. Our society is already demonstrating other symptoms of the end of a cycle, too many to list here. This should tell us what we should do now, and none of the politicians I see now on the national scene has what it takes to make the necessary changes. We need to find people with the strength to make the hard decisions, and we must decide to help them in any way we can to preserve democracy in its real form.
All these favorable and often rosy writeups about our economy written by supposedly educated people make me wonder why they write them. Who do they think the readers are? How can we have a healthy economy in this country when there is so much outsoursing. All the people who lost jobs can’t pay taxes and and can’t be healthy consumers of goods. And where are all the goods manufactured? Not in this country. Do we have manufacturing here? Just don’t tell me we do, when as everything you look at, is made all over the world but not here. I would think this will give you the gist of the story. So what makes the economy ?
Tibi, manufacturing HAS been picking up in this country, but increasingly, companies are using robots and automation wherever possible, to avoid the hassles human employees cause due, largely, to the laws and regulations enacted by politicians buying votes. Employment has only picked up a little, as a result.
A nice job, Ken, of working out the cycles, and the relationship of the gold standard to the decline of cultures. I have noticed how, after Nixon removed gold backing for the Dollar, our own culture, slowly at first, but more rapidly now, seems to be losing cohesiveness. Perhaps that is why, as people begin to lose faith in society, the government comes up with more laws and regulations, attempting to codify the loose but cohesive social order that formerly prevailed. I doubt if it will work. It will likely result in some form of dictatorship before very long. That has often been what happened in the past.
Nixon the Republican removed us from the gold standard, opened China and did away with the draft… ALL three of those moves have proved to be destructive America… Financial regulations brought by FDR, the Democrat, in 1933 saved America from the highly dangerous types of trading that brought the destruction of 1929… We are currently without those Financial Regulations and we have already had one repeat of 1929 under Republicans Cheney/bush in 2007… Will it take another crash before American voters DEMAND the return of those financial regulations?
And now a word from the DNC…!
I heard a great description of the difference between Democrats and
Republicans. One is black with white stripes, the other Is white with black stripes. Jim
Ken, you are an inspiration. I have wondered whether it would payoff to devote some time and energy to researching what history reveals about empires and debt. Your work is encouraging that such has been written, and, can be discovered. Thanks – Bill
I add to all this the uncertainty of if anything can or will get done in congress. We desperately need an infrastructure bill passed, some sort of progress on the budget done and tax reform accomplished. Instead,we are still hearing the same nonsense regarding people’s personal lives.
Quit electing Republicans , who are more interested in taking women back to the 1950’s than repairing the infrastructure in American and putting millions of Americans back to work…
Don’t you mean the 1850’s. Mike?
Good correction… Agreed! You must be married to an educated, strong willed smart women, aye?… :)
I think someone ought to check the Market Roundup included with each of Mike Larson’s daily emails. The price of oil has not changed in well over a week.
I think someone ought to check the Market Roundup included with each of Mike Larson’s daily emails. The price of oil has not changed in well over a week.
Well, oil might not have changed, but gasoline in Texas has dropped $0.15…!
93 octane will be under $2.00 in a few more days if this trend continues.
I can not remember when you named the main US problem with oil. Look no farther than congress.We have found the oil to eleminate the problem of deficit,however; the weak brains in washington passed a law that prohibits importation and we have a law that chokes oil to death.
Mike L., QE’s may have some short term effect, but can never work in the longer term. They will always create an expectation of further easing, and that can never keep happening without destroying the value of any fiat currency and resulting in runaway inflation. I think even the Fed members must understand this.
An economic indicator I have used for years is the number of eighteen wheeler trucks
traveling the interstate highways. Lots of trucks good times and few trucks recession.
I have never seen more trucks on the interstates than at present. Also true of the
secondary road I live on.
Concerning your remarks on employment, Mike, we had better get used to the idea that computerization, automation and robotics are making human workers increasingly superfluous in most fields. This will increasingly mean that a relative handful of humans will “earn” their way in all but a few fields, and most of us will be dependent on some form of that thing called “welfare”, for lack of a better name.
Amazon just opened a huge new “fulfillment center” locally, and hired over 3000 workers who sort and collect the stock, and pack the orders. The stock is mostly moved from place to place and to appropriate shipping trucks by robots and conveyors. How long before Amazon figures out how to sort, collect and pack most of the orders via robots, also? You can bet they must be working on it, and when it becomes cost effective, nearly all those 3000 odd workers will be on the street. Things such as this happen almost daily, not only in this country, but in other countries as well, so it is occurring worldwide. Populations are probably growing faster than meaningful jobs now. A time seems to be approaching when only “creative” type work will use humans to any degree.
If we opened the Keystone Pipeline an allowed the sale of American crude, maybe we could just let those people in North Africa and the Mideast to do just whatever they wanted. We could save a lot of money and heartburn.
Yes Jim. Oil independence and jobs.
Personally, I believe you are correct in your assessment of the jobs market, as a laborer myself. I just got laid off from my customer service position and am having a hard time finding other work, despite experience in construction, parts assembly, customer service, forklift driving, etc, etc. If the STOCK MARKET gains from European and Japanese flight capital, it does not mean the JOB MARKET will and when the crash to end all crashes comes home to roost the situation will already be that much worse. I believe in Mr. Edelson’s predictions. they are extremely intelligent and grounded in reality. But they sure aren’t pretty, are they?!
‘Just saw someone observing that women’s hemlines are starting to move lower. That is said to be a very bad sign for the markets???
Chuck, I believe the hemlines move with climate change…
You know… Today it is sunny and hot…
In a couple of months it will be cold, snowy and icy…!
Someone else says that junk bonds are like theater with only one exit. That works fine until someone yells, “FIRE”!!
Sept 30, 2015
Mike,
I am shocked you believe U.S. government numbers on unemployment. Tens, maybe hundreds of millions of people, know that when it comes to unemployment rates, the Bureau of Labor Statistics (BLS) does NOT count large segments of of the unemployed, such as those who STOPPED looking. How can the BLS assume millions of people are now employed simply because they stopped looking? That’s absolutely STUPID! And insane!
Mike, stop making yourself look like an idiot by believing the BS from the BLS !
Yeah I agree with you Kem!
Anybody who believes the government numbers on unemployment
isn’t thinking very hard!
The BLS reports on those who have stopped looking separately. The headline unemployment rate is based on those who are working or looking. The labor participation rate takes the others into account. It’s not like they’re hiding anything.
Yes Mike L. ~ Please stop insulting us by giving any credence to the governments employment numbers… They are insulting to Americans and to republish them is only more insulting…!
Didn’t I recently read that there are about 93 million people employed in America? That’s less than a third of the population, supporting the other two thirds plus.
Under the Brits,the world was more civilize;they built bridges,rails,communications.Under the once friendly,humble US,-now super-arrogant,under their ethnic elite masters,they go around the world destroying bridges and infrastructures,kidnaping people from any country,with the help of Mozart with impunity,messing up the world with self-righteous corrupt ‘democracy’,which is unfunctionable in their own country,dividing Russia from Ukraine to turn it into a second Isreal for the Elites.Who are they,and for what purpose are they using the Saudi Donmeh Jews through Mecca to create Al Qaeda and ISIS to terrorize and eventually take over the world,through their ‘Multinational Ethnic corporations?
Jews created a Qaida and ISIS? Now I’ve heard everything!! Hee-Haw!!
Phanu’s comments are about as intelligent and intelligible as many of the other comments posted above–NOT VERY.
Mike while i believe inflation and deflation have had a tug of war for the past several years, it is no longer much of a contest. Deflation has won.
And because you report this bad news i have decided to read the obituary column instead. I need something to cheer me up. :)
German unemployment rate rising; what will they do with 800,000 Muslims that do not speak the language? And, I can’t help but wonder if many of them have a skill that is needed there. All of these unemployed young men in a strange land will cause a massive increase in crime. Europe looks to be sliding rapidly into chaos. But, so much of what I see here seems to be pointing us in the same direction. Western Civilization on a death watch?
Frank, those muslims are there to fight not be employed…!
Michael, first of all, NOBODY, should EVER take these job reports, especially from the BLS, and to a lesser extent, ADP, seriously. You have to reverse engineer them to get to the truth and factor out economic hedonics. Most sharp people will go to shadowstats.com by John Williams to get the true data. Having said that, you are right on to say this is the best job report to come out for a long time. We are facing an off the chart, deflationary storm, that is in progress and likely to be the worst since the great depression. Most people have no idea how bad this situation is going to get. A very big hint should be the fact that the world’s second largest economy, China, has just had a 45%+ stock market crash, within 2 months. This is EXACTLY the same magnitude and duration of the initial 1929 crash here in the US.
Hey Oscarr, What’s on your mind?
I just thought when the Federal Reserve next meeting, Janet Yellen should start off the opening with this: There is nothing wrong with your computer. Do not attempt to adjust the picture. We are controlling transmission. If we wish to make it louder, we will bring up the volume. If we wish to make it softer, we will tune it to a whisper. We will control the horizontal. We will control the vertical. We can roll the image, make it flutter. We can change the focus to a soft blur or sharpen it to crystal clarity. For the next hour, sit quietly and we will control all that you see and hear. We repeat: there is nothing wrong with your computer. You are about to participate in a great adventure. You are about to experience the awe and mystery which reaches from the inner mind to – The Federal Reserve (Outer Limits).LoL
From the time Obama became President, I had predicted a serious downturn in the economy here at home but in other major portions of the world. Why a totally inexperience former college professor was put in the position of Commander and Chief of the armed forces and the nations “leader?” is not really hard to determine. Now that we are in the situation that we now face, World War III is on our doorstep and major action throughout the nation will have to be activated. This starting with a massive effort in the build up of our military might.That creates jobs. Our secret technologies that are developed and in development must now come to light and be put into action. New and fantastic materials like Graphene must be fully utilized and we must develop a way in which we can tap into China’s huge graphite raw material resources. All of this and much more must be put into immediate action and the days of talking about it are over. The Constitution supports major action such as this. The Obama Regime must overthrown. We are going to war, like it or not. The draft will be re-instituted. “Rosie the riveter” will return. We are in serious times and all of the signs and symptoms have been developing and the media ignores what is really happening. I was right about Obama before he was elected and was outspoken on the issue. The majority of the nation’s population acted as if the all had a brain disorder, and perhaps they do. Think seriously about what I have just conveyed. The parts a pieces of a major U.S. disaster will come together very rapidly within the next 8 to 10 months so we have no time to waste. The functionally independent individuals must take action and lead NOW! There is a lot more involved here but I have stated enough for now.
I don’t know what kind of Indian Pipe you’re smoking Mr. Gray. Ever since World Trade Organization was established the need for our military power to keep commerce lines open have taken second step. Our military budget still is more then the rest of the world’s combined. These are from U.S. citizens’ blood and sweat. When will be wizened up to stop being the world’s babysitter. Instead take care of our internal problems. Like spending on education, infrastructure. Our long term and lasing strength is in our democracy. When your are reduced to not knowing when your next meal will come from, the democracy will take a hike.
From the time Obama became President, I had predicted a serious downturn in the economy here at home but in other major portions of the world. Why a totally inexperience former college professor was put in the position of Commander and Chief of the armed forces and the nations “leader?” is not really hard to determine. Now that we are in the situation that we now face, World War III is on our doorstep and major action throughout the nation will have to be activated. This starting with a massive effort in the build up of our military might.That creates jobs. Our secret technologies that are developed and in development must now come to light and be put into action. New and fantastic materials like Graphene must be fully utilized and we must develop a way in which we can tap into China’s huge graphite raw material resources. All of this and much more must be put into immediate action and the days of talking about it are over. The Constitution supports major action such as this. The Obama Regime must overthrown. We are going to war, like it or not. The draft will be re-instituted. “Rosie the riveter” will return. We are in serious times and all of the signs and symptoms have been developing and the media ignores what is really happening. I was right about Obama before he was elected and was outspoken on the issue. The majority of the nation’s population acted as if the all had a brain disorder, and perhaps they do. Think seriously about what I have just conveyed. The parts a pieces of a major U.S. disaster will come together very rapidly within the next 8 to 10 months so we have no time to waste. The functionally independent individuals must take action and lead NOW! There is a lot more involved here but I have stated enough for now.
Hello UK calling,I know parts of your unemployed system,after 6 months your off the system so he is not unemployed,great,so what is ,dead?Its crazy.The one who thought that one up should be given the nobel prize for stupidity,but you must agree it will look good on paper,Maybe they should also show the “dead people” Naaaa it might just show the real unemployed figures.Now we dont want that now do we, it might give the game away
I can only report here from the Upper Midwest, Mike, as to the unemployment situation and it’s this: anyone not working is either refusing to take a job outside of their expertise, or has no idea of how to get or hold a job, or doesn’t want a job. We have so many job openings here in MN that a friend of mine said that there are employers so desperate for workers they probably would grab a chimp off the street if they knew they could get it trained. Our local factories in Fargo/Moorhead all the way to the Twin Cities are short on folks so badly that one factory actually went out and hired people from the Ukraine, housed and bussed them to work. Those folks were eventually sent back and the Russian government refused to continue to let people out or more would have been recruited. My hubby just reported that they were so short on workers for their road construction crew at his job that they were subleasing work out to other companies. However, I think that most kids are not getting the right kind of training. We need electricians in this local area so badly that the one really good one we have is practically dropping from exhaustion. We finally got a handyman in town after he left the Williston area, and now beet and potato harvest is on and there won’t be enough drivers. Granted, the local potato driving jobs suck in pay, but they pay, and older drivers who may not want to work so long during the season can pick up some short term work. I remember what the job market looked like back in ’07 and ’08 and we are no where near all that.
Beth,
Thank you for reporting on the “real” recovery that is going on in America from the heartland…. How refreshing to hear the truth rather than the rantings of the ‘tin hat brigade”…… Our great country is slowly recovering from the economic disaster of the last “Republican Revolution” and will continue to get better despite the Right Wing screamers from Clear Channel…..
Beth, you do not understand the technicalities, procedures, protocol, conventions, and inbred culture of the present day job applicants.
From birth their parents have told them they will graduate from high school and then go on to college and get a degree.
It doesn’t matter what the degree is in, just get a degree so the parents can say Suzy or Adam is going to such and such university and will graduate with honors.
Twenty-five percent of the college graduates should probably be in an office using a word processor and the and the other fifty percent should be working on Fords and Hondas.
But rather, they have a degree in basket weaving, law, or medieval dance, and there is no way in hell they are going to take a job driving a truck or work on an assembly line.
And that sweetie is one of the big employment problems in this country, and it is also why the United States attracts illegal immigrants to fill those jobs that are way too far beneath those stupid ridiculous college degrees.
15 yrs. ago economists said America would become a ‘service” country. Low paying jobs; grocery clerks, store stockers, check-out people, waitresses,7-11 people, etc. All “good” jobs ore overseas, in my opinion, because of their beloved unions. Union leaders, to justify “THEIR” high paying jobs , demanded ever increasing obscene wages and benefits that priced our products out of the world market; example. 83 dollars/hr. for a job on the line at GM. And Obama pushing for more unionization; Mainly to buy VOTES. Those jobs are gone FOREVER. You who had those jobs are paying the piper.
Putin has let Obama know in no uncertain terms that we are irrelevant in the middle east and can just go home. All John Kerry can do is Tweet American policy. If they are progressives, this isn’t too much progress. Putin is allying himself with the Iranian caliphate which includes Iraq and Syria and of course we will help finance him by giving Iran $150 billion dollars. All our cowards in Congress are willing to do is to try and pass a bill making Iran pay the $44 Billion in judgements that have been issued against them in the US. We no longer project power or even common sense, only timidity and weakness. Europe will only get weaker as more and more refugees go on the dole and the Euro will be no more or severely constricted within the next 5 years.
Mike, it’s high time for Weiss Research to end republishing government numbers known to be false and misleading using the kindest words I believe possible, and to be completely truthful, the information you pass on from various government agencies are outright lies, information that is immoral deceit, and procedures and market protocol that is plain fraud.
How in good conscious can you represent Weiss Research, a business that supposedly provides good, verifiable and reliable information about the economy and markets for use by serious investors when you fail to point out and investigate the various farces being perpetuated on investors (and Americans in general) by the Federal Government…?
There are sources out there we all know have the true numbers that will give us all a better picture and direction when making investment choices.
The age of political correctness in America has come to an end and Americans and investors in particular do not want to hear the same old political song and dance that is romancing this country into total collapse.
Surely your firm has the resources to provide the “real numbers” not the government B.S. we’ve been fed for the past 65 years.
Trust the fact that as sure as the Sun comes up in the East, and goes down in the West, the age of political correctness, beltway lies, Wall Street corruption, and Washington slight-of-hand skullduggery and half truths is ending…!
The perpetrators need to be heading to other lands to save their unredeemable criminal and corrupt skins…!
Fires of manipulation fanned by easy money around the globe now provide just a flicker of flame and only a wisp of smoke. The mirrors used by central banks to enhance the small flames into large fires are being shattered by lost dreams and dying hopes. Smoke and mirrors has and will always be just a fools recipe, as reality sets in to expose the farce designed to hide the obvious truth.
Are we in “The Matrix”?
could Mr Smith’s line “human beings are a virus on the earth” be true?
Our future lies in rethinking our present situation and looking for opportunities to make money, improve our society and our earth, while battling economies and businesses that are failing.
I wonder how this will affect the Amish
Bruce
Weiss loses credibility when they use the slanted, wrong, incorrect, deceitful, politicised government manipulated statistics. Weiss has been doing this for a while and should really know better. I still read this site but others are more on the ball with regards to stats. (Unemployment would be 23% if the 80s statistical methods were used.)