The June jobs report was quite a shocker. Turns out July gave us an encore.
Market Roundup
The Labor Department said the U.S. economy created 255,000 jobs last month, well above forecasts that ranged from around 170,000 to 180,000. The readings for May (+13,000) and June (+5,000) were also revised higher.
Job gains were fairly widespread, with 70,000 added in professional services, 43,000 in healthcare, 45,000 in leisure and hospitality, and 38,000 in government. Mining was the lingering weak spot at down-6,000. But modest job growth returned in construction (+14,000) and manufacturing (+9,000).
As for the unemployment rate, it held steady at 4.9%. That was slightly worse than forecast, but participation in the labor force ticked up. Average hourly earnings rose 0.3%, slightly better than expected. That left wage growth at 2.6% year-over-year, unchanged from June.
No doubt these are stronger-than-expected numbers. But how do they square with the slowdown in GDP, the longest negative stretch in corporate earnings since the Great Recession, the decline in business investment, and the nascent weakening in key sectors like construction and autos? Not very well.
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| The stock market jumped, the dollar rose, and interest rates climbed. |
Throw in the tightening of lending standards I discussed earlier this week, and there’s still plenty of reason to expect job growth to decelerate in this late-cycle environment. That clearly didn’t happen in July, though. So the stock market jumped, the dollar rose, and interest rates climbed. It’s worth pointing out that short-term rates rose more than long-term ones. That flattened the yield curve further, a consistent trend we’ve seen for more than a year.
Interestingly enough, the strongest job reading of the dot-com-driven cycle came in March 2000 (+468,000) – right when the markets topped out. The best readings of the housing bubble cycle came in mid-2006 through early 2007 (+mid-200,000s to low-300,000s). That was right around when our markets topped out in that expansion.
Nobody knows for sure if that same process is about to play out again. But decades of market and economic history suggest it would be very, very abnormal to see a new bull market and a new expansion at this point in the latest cycle. So keep a wary eye on the data and on how markets digest it in the days and weeks ahead.
What do you think? Is the economy shifting back into higher gear? Or are these figures about as good as they’re going to get? Is the “real” trend in employment the weakening we saw in the spring … or the strengthening we’re apparently seeing in the summer? How should you adjust your investing stance in light of these figures, if at all? Definitely take some time to weigh in when you get a chance.
Until next time,
Mike
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Where are markets headed, and how will tighter bank lending standards impact things? That’s what you were discussing in the past few days.
Before I get to those comments, I just wanted to clear up what my charts on Tuesday showed. The bars show the net percentage of banks that are tightening or loosening standards in a given quarter.
Bars extending below the zero line show that more banks are loosening standards than tightening. Bars extending above the zero line show the opposite. The higher or lower the bar, the greater the percentage of banks doing the tightening/loosening. I hope that clears things up.
Now, let’s move on to the comments, the first of which is from Reader Timothy. He weighed in on the market outlook, saying: “The fact that many are expecting a ‘correction’ in the market is, indeed, a bullish sign from a contrarian point of view.
“However, my own analysis has produced this: 1) The ‘January effect’ has already pointed to the conclusion that the market will swoon at some point during 2016 2) According to ‘Dow theory,’ the Transports have been on a downward trajectory, again indicating a coming overall market correction, and 3) The Bollinger bands on the VIX chart have just really compressed, almost a carbon copy of last year’s action just prior to the 1,000-point sell-off in one day, and subsequent selling during the latter part of August 2015.”
Reader This World added: “If you keep trying to raise stock prices by reducing the number of employees and moving jobs and capital to other countries, your customer base … the American middle-class worker … won’t be able to afford your products.
“So until and unless Wall Street starts to act as if it gets that ‘We are all in this together,’ and starts acting in the interest of the public, I suggest and believe the equities market will collapse altogether. The fruit is rotting off the trees from the inside out.”
On the subject of lending standards, Reader Steven P. said: “Great insights as always. The charts and data are compelling. The credit/debt side of the markets are the distant early warning of what’s coming on the equity side. It ain’t pretty! In my opinion, we’ll be fortunate if a recession is the only consequence of this latest ‘everything binge’.”
And Reader Henry A. added: “Easy money destroys innovation, and promotes speculation and excessive, non-productive debt, both business and personal, that will not be paid off. It’s the perfect formula for the recession we are likely already in.”
Thanks for sharing. I believe there are enough signs all pointing in the same direction – that the economic expansion of 2009-2015 is starting to falter – even if that wasn’t apparent in today’s jobs report.
Agree? Disagree? Let me know over the weekend in the comment section. Or if you want to tell me to my face why I’m on track (or crazy!), join me at The MoneyShow Toronto. It will run September 16-17 at the Metro Toronto Convention Centre.
I’m participating in a panel discussion, delivering a solo presentation, and taking as many questions as I can from investors like you. You can register for free by clicking here or calling 800-970-4355 and mentioning priority code “041484.”
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I wrote last week about the risk that ultra-low interest rates pose to pension plans. But did you know they also hurt life insurers by making it much more difficult to fund long-term liabilities with investments like bonds? MetLife (MET) provided evidence of that when it said second-quarter profit plunged 90% to $110 million.
The largest U.S. life insurer added that it would fire workers and take other steps to cut costs by $1 billion. That is yet another example of how QE not only doesn’t help, but actually hurts.
Things haven’t gone well for Donald Trump in the last several days, and multiple polls are now showing Hillary Clinton pulling ahead in the presidential race. One from the Wall Street Journal/NBC News shows Hillary with a 9-point lead.
Have at least $100 million to blow? Then here are just a few of the exotic homes you could buy here in the U.S. and abroad, according to Bloomberg. I don’t know if you’d call it a sign of an impending real estate bust, but Christie’s says the number of $100-million-plus listings jumped to 28 from 19 this year.
The New York Times, for its part, just published this story about several struggling or failed housing projects in the Greater New York area. Some have had issues with financing or permits, but brokers and others quoted in the piece say the softening market is at least partially to blame.
So what do you think? Is the housing market taking a breather, led by the vastly oversupplied apartment sector I’ve been discussing recently? Or will it hold up just fine? What do you think about Trump’s recent stumbles, or the loss of jobs in the insurance industry – a direct consequence of global QE? Hit up the comment section and let me hear about it.
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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The jobs number was great, if you believe anything this administration says. Remember they falsified the unemployment number just before Obama’s election. There is still no demand in our economy and until the common sense lacking Fed realizes that it needs to put money into the hands of the middle class who will spend it, not corporations and banks we will have the same stagnant economy as Japan has had over the last decade. Wake up Fed!!!!
Thoughts:
1) Can anyone really trust the government’s “numbers?”
2) Markets rallied today because a perceived “Happy medium” was reached….good jobs numbers, indicating growth, while at the same time, a stalled-out Fed, which would NEVER dare to raise rates before the elections.
#) Yeah, I’m seeing some “now hiring” signs out there…. They’re looking for drivers who will use their own vehicle to deliver pizzas…..they’re looking for someone to work the graveyard shift (when a robbery is more likely?) at the convenience store…….they’re looking for more part-timers who will agree to work no more than 28 hours to ensure that no Obamacare health insurance has to be provided by the employer. These are the vast majority of “jobs” that are available in our area!
Doesn’t say much for the prospects of the intelligent, highly skilled, and/or upwardly mobile does it? But they’re still “jobs” and they still count!!
…..Sad, sad state of affairs!!!
Hidden behind the stats are more realistic stats and the truth. But they’ve got the population following the silver bullet in the direction they want them to look while secretly trying to dig themselves out. They’re slso not documenting the fact that if a person is working more than one job than the unemployment numbers are even higher. Great way tp spread the labor wealth.
It was the end for Trump when Ted Cruz refused to endorse him at the Republican Convention.
Major, major overstatement, IMO. Save this email, dude, and look back on it if Trump wins. What will it teach you if that happens?
Hoping you can give me a bit more confidence in the VIX going up in August and September, as I have been contrarian, picking up my bets on a market contraction. While all the big money seems to be pumping up the S&P, I cannot find my way to follow it up. I don’t believe oil can rise above 45$ without more rigs coming back online, and believe that this will hurt the energy sector harder than expected. We are just seeing the beginning of what the drop in oil has done, even to the best in breed, such as ExxonMobil. I also have been finding information that supports the theory that the best shale producers are learning to get the black stuff out the ground much cheaper than ever. Please let me know your thoughts, and if you think I should continue with my contrarian bets. Thank you very much!!
I suspect that the jobs numbers, the GDP, and the market will be better than expected
until after Hilary is elected. After that, we will just have to see how long the band continues to play.
Unemployment is always a lagging indicator, in retrospect. That’s the problem. But effectively, it doesn’t really add up with other economic data, as mentioned. Anyway, this credit expansion will reach its end sooner than later.
As I pointed out a few weeks ago and as Mike Burnick has been saying and discused again in today’s Money and Martkets, the stock markets are set up for a stong advance from a technical and charted stand point. The major indexes are trading way above their 200 and 50 day moving averages after treading water for an extened period of time (414 days). I am very confident in the future raise in stock prices!
As an aside, tomorrow’s jobs report will be a backward looking statistic and, therefore of little value in predicting future stock market moves!
It is beginning to look like the US GDP is picking up quite a bit and the labor market is strengthening too. I have been seeing “Help Wanted†signs all over the place! It’s almost like everyone who is willing to work is already working and that just leaves those who don’t want to work anyway!
Anticipation can cause activity…like
flying through the house because your
mother-n-law is coming over. You do
what you can to get rid of the trash. You
also get rid of evidence that may expose
a not so good life style. Businesses do
the same thing when a big light is going
shine on them when announcements are
forth coming. So, the current up tick may
be better to take with a grain of salt.
90 million able bodied workers are unemployed. 255k, which is probably massaged number because BLS is a lying propaganda arm of Bummer, it is a spit in the wind. We have big problems because 30% of the working population carries the rest. It is an unsustainable load. But Hillary wants to bring in 5 million unskilled Arabs and increase legal numbers 3 fold. Planned implosion of our economy and social safety net.
I have been seeing huge numbers of multi-family housing units under construction in the greater Phoenix area for the past couple of years. It sounds like this is happening in a lot of other places, too!
So if you have $750,000 or less in stocks or mutual funds with the market going up(an aberation no doubt) when should you go to cash(liquidity) and buy gold/silver & related investments??? How do you avoid the HELL we are moving toward? Please dont tell me Trump because I will GET SICK.
THANKS.
The only entitity that has had solid gains over the last 8 years is the government. Higher taxes state and federal and all the interests income the Federal Reserve is generating with all the bonds they have been buying.
It is a great deal for the government for obvious reasons but one that is mostly overlooked is the government never pays income tax. All they do is collect it.
If each citizen looks at the taxes they pay on everything there would be an up rising. There is taxes on a gallon of gasoline. On your cell bill. Local and state taxes when you buy just about anything.clothes ..Property taxes. Etc… I would bet depending on each state and local,sales taxes the average person is paying close to 50% state and federal taxes.
If you do not believe me take a piece of paper and list the taxes/fees you pay each year.
Do the hard math. You will,see
I have been pointing that out to folks. Advising them to get out their pencils and look at how much taxes they’re already paying and that substantially more tax burdens are forthcoming. Confiscation through taxation iwill be the result. I also wonder if small business will be handed the corporate short fall and end up working for the government due to taxes burdens.
Do we really believe numbers like this from a corrupt Administration that has shown time and time again no hesitation to lie about anything in order to make itself look better?
The IRS, the CIA and the military leaders who still have a job have all become Obama lapdogs, along with CNN, etc.
Why would we expect the Labor Department to behave any other way?
Why “moderation”? PC in this arena should not be expected.
Is it feasible to think a hyperinflated market could suckered all the cash out of private investors? Before it crashes and burns that is!
The housing market is “a strange bird” in many places the price to rent is higher than a mortgage on a very decent home. New York and many Metro areas are way overpriced, with Corporate and LLP investors scooping up apartment buildings and land for development and then raising rents spectacularly. The middle class and certainly lower income individuals are being priced out of many markets.
Mr. Trump will continue to “stumble over his words” because he thinks he is smarter than everyone else and he can say anything or insult his way out of a logical argument. However I think he is more cerebral when it comes to making and securing deals and relationships and could perform well in certain situations. There is a portion of America that loves his “ANTI” rhetoric and he won’t lose them. His challenge is to gain support from those they may weigh words and actions a bit more then calculated and or spontaneous conversation.
The jobs numbers (up), the stock market reaction (up), and consumer spending (up) just don’t make sense to me at a “gut” (common-sense) level.
All of the individual indicators are poor (transportation, productivity, wealth transfer, etc.), yet people are investing and spending like there’s an economic boom?? Either I’m not seeing something that they are, or they are making a big mistake.
My guess is that people at all levels (from the individual investors to big businesses and the big bankers) are psychologically expecting to be taken care of or rescued if anything “bad” happens. That expectation is because of their 2008 (and after) experience. Had the power elite not interfered in 2009 (and after) and had folks (at the top, especially) suffered the natural consequences of their mistakes, their behavior now would be quite different–that is, more realistic and rational.
Job figures seem very often to be followed with a “correction” a month or so later, that brings the totals down considerably. We wait to see what sort of correction we will see from current totals. A sizeable reduction, coupled with considerably lower totals for August, would be anything but positive. Also, how much of these figures reflect summer jobs for students, who will quit, and go back to school in late August? They may not show up until September.
Half the new jobs reported by the BLS are actually “educated guesses”, and because this is an election year, there is good reason to be skeptical of any rosy government reports.
Government receipts are trending down for six quarters now, and the Cass freight index, that measures volume of American freight shipments,has trended down since 2013. Startup businesses are down. Debt is up. Can anyone think of any explanation for job increases?
I read somewhere that baby boomers (in the US) are retiring at the rate of 200K per month, which is very similar to the 200K new hires per month. Not saying that when a baby boomer retires, that the company immediately goes out and hire a new employee, but on the average that may be happening to some extent. As baby boomers retire, money is freed up to hire new people in general.
EVERY DAY 10,000+ baby boomers retire every day 10,000 young adults reach the working age 18 to join the labor market monthly unemployment numbers are still in the multiple of 100s of thousands and without a doubt under reported by the bureau of labor statisitcs all i know is employment doesnt go up in a straight line isnt it strange that for the first 5 months of this year employment figures (jobs created) got lower then lower then lower to 8,000 jobs created then suddenly shot up in june then went stellar in july to me these numbers stink i think the BLS should change their name to the B./S. OF LABOR STATISITCS
It’s becoming more clear to me that the Fed is actually stealing from the value of our dollar. Loaning money to banks at .25% interest inflates the prices of stocks, real estate and other investments. At the same time, it takes value from the savings of seniors on fixed incomes who saved through their lifetimes and need and want to have safety of their capital in savings accounts, money markets and bonds. It has also been eroding the earnings of most all of the giant public and private pension funds. It’s like the pension funds are coins in a bag and the Fed snips off the corner of the bag so the coins slowly disappear. Add to that the giant deficit of our great country and you’ve got the recipe for a mega disaster. Sure, the market will rise for a while, but we didn’t learn the lessons from 2007-8 and we are going to be spanked again. Or, as they said about Greece, the investors are going to get a “haircut.”
Yes I agree you see foolish things like 100 million dollar homes towards the end of a cycle. We are truly in the madness stage now. They are also building a 10,000 room hotel somewhere Dubai I imagine it is well known for the most outlandish things in the world. People can pop in flash their credit cards and get a posh room. Life has been amazing I have lived from having a crank telephone on the wall to little bitsy things I shove in my pocket. Crank phone life was a much slower time to stop and smell the roses. Today is about outdoing everybody else drive a bigger car have a bigger house have more debt than your neighbor.
Yes I found the 255,000 new job figure interesting. I ask myself how can an economy jump from 11,000 jobs 2 months prior to 255,000 jobs. I guess we just have to take the governments word for it. I love the way Harry Dent drills down into the numbers. It seems that the jobs were split between very low wage jobs and jobs that pay $40 and hour but not much in the way of middle class jobs the consumer class jobs. Yes wages did go up some but after years of wages falling behind or staying stagnant is this really a great epiphany/victory? hardly. It is along the same lines as the chicanery used by corporations when they submit their declining earnings quarter by quarter yet they are show cased in a way to make investors think that all is well. Yes the lowering of the limbo stick by governments and big business is keeping us all in limbo. As my wise old grandmother used to say “You can fool some of the people some of the time but not all the people all of the time” The joy of being retired is that one can sift through all bologna that business and governments are handing out and view the big reality picture but sadly it is not pretty. I think back to my working years when so much important was happening but I was to busy being a wage earner raising a family getting divorced to notice the important things going on in the world. At this time governments and big business were honing their skills of deceit. The chickens have come home to roost.
Mike, how can we trust the Federal Government and particularly the Obama Administration on these numbers! Do you really believe that we have 4.9% unemployment? The Justice Department, the IRS, liberal Supreme Court Justices and the Labor Department are all on the “Get Hillary Clinton Elected” train and they are shaping the economic narrative to get her elected! In truth, even Republican political insiders like Paul Ryan are working directly or indirectly to insure a Clinton victory so they can run against her in 2020. There is no stopping the politicians from leading the United States into a major financial collapse!
Adaptive analysis is similar to proxy analysis. What we need in the greater economy is a few more proxy millionaires?
The housing market in the lower easter Michigan is very good at this time . Any older home that has been taken care of or turn key shape is selling within days of hitting the market . the housing market across the state is doing well every where , because I still have friends I talk to who are builders and they have more than enough work .I think demand here is going to stay hot for some time with the rates being so low the chances it will continue seem pretty good since I sold my home in June which sold within two days . It looks as though the economy, bad or good ,will not change the buying push with the interest rates being low.
Trump has a Yuge oppty to win this election. He won the primary through support of long-term disenfranshised voters who just had to go with the flow for years now. He now needs to do the same with the disenfranchised (ie Bernie voters) on the Dem side. Instead of criticizing Bernie, he should be selling himself as the candidate that can finish what Bernie started.
Trump has the largest ego we know, but he needs to realize that he should listen to his advisors now. No more boneheaded petty attacks, that just doesn’t play out in the general election. The future of our country depends on Trump winning. And no, i don’t think he’ll be a great President, but i do think it sends a message to the political class that the People are in charge!