If housing, manufacturing and consumer data were not enough to convince the reader, surely the Employment Situation Report disaster that befell us Friday was adequate. It confirmed weakness in the labor market that was also seen just days prior in the Challenger Job-Cuts Report, ADP Private Employment Report and weekly initial jobless claims data. Indeed, this may seal it; recession could be in our future.
Prior Month Result
88K Nonfarm Payrolls
Weekly Jobless Claims
CB Consumer Confidence
Pending Home Sales
New Home Sales
I have been reporting on and noting steady deterioration in economic data for several weeks now, and it led me to reverse my bullish position on stocks at the close of Q1. In case you missed our reports covering the deterioration in housing data, manufacturing measures, consumer confidence and employment, the articles detailing the decline follow:
I suggested over the course of this past week that the economic perspective of investors could be remolded by the manufacturing data and the employment report. The Employment Situation Report is probably the second most important economic report that economists and investors follow, so the news was indigested by investors. Let's have a look at the data that may seal our fate to recession.
Employment Situation Report
The most distressing part of the Employment Report was certainly the nonfarm payroll shortfall in March. The economy added just 88,000 new jobs in March, against the revised higher February figure of 268K (revised from 236K). Economists forecast 193K at the consensus, and even if we adjusted for the prior month revision, economists still would have missed this result by a mile. So it is bad news and it is worse than the experts thought it would be. As a result, the message transiting today from the economist's office to the investment strategist's suite to the analytical departments of institutional investors is a negative one. And so we understand why stocks were lower.
SPDR S&P 500 (SPY)
SPDR Dow Jones (DIA)
PowerShares QQQ (QQQ)
iShares Russell 2000 (IWM)
Private Nonfarm Payrolls, which measure job addition excluding the government or public sector, showed American businesses added just 95K jobs in March. That was down from 254K in February (revised from 246K), and short of the economists' consensus view for 200K. Obviously, given the consensus figures and market reaction, nobody saw this coming, except save a handful of people on the Street.
In the comments that follow here below, many will continue to contend with the concept of a recession occurring this year. At last check, economists' forecasts for the first quarter showed increasing estimates, according to CNBC's Steve Liesman in Friday commentary. Even the Fed failed to incorporate the consequences of the sequester spending cuts and the payroll tax hike into its own forecasts for 2013 in March, despite warning about them at the press conference.
So why should I be surprised to find the investment community missing the boat one more time. It's the same group of people that produced pundit after pundit who said "nobody could have seen the financial crisis coming" a few years ago. That's just an excuse for the failure of the speaker to see it coming. You, the investor, now have another negative economic data point to add to the rest of the pile of recent figures showing deterioration in the economy. With stocks having marked great ground up until now, it's going to get harder and harder to ignore that mess. Capital flows into equity funds are going to increasingly seek value plays and safe havens like gold. Yes indeed, the economic data is getting harder to ignore, and this major jobs report may seal the deal for the broad economic perspective.