Three important labor market data points reached the wire over the course of the past week. Given what is developing globally, they contribute to my concern that the job market, economy and stock market face serious threats. The number of job openings declined significantly and the number of newly unemployed continues to creep higher. Those are leading edge indicators of the labor situation, and they could very well reflect deterioration in our broader economy. With the latest Fed forecast indicating stagnant expert expectations for the unemployment rate as well, investors had better take heed.
The latest data to reach the wire was of course Thursday's Weekly Jobless Claims Report, which showed that the flow of the newly unemployed continues to creep higher. The latest data covering the week ending June 16 showed new filers for unemployment insurance was just slightly under the revised prior week figure, at 387,000 (-2K). The figure was still 5K higher than economists' expectations at the consensus, based on Bloomberg's survey. The four-week moving average of jobless claims illustrates our point best, as it increased 3,500 on its way up to 386,250.
Meanwhile, earlier this week, the Bureau of Labor Statistics published its Job Openings and Labor Turnover Survey. The monthly report showed that job openings declined by 325,000 in April, to 3.4 million. Job opportunities dwindled across all major categories, including total private and government sectors, and also more specifically in manufacturing, professional and business services, and within state and local governments. The same report showed that layoffs and discharges increased across the Northeast, Midwest and West, while improving in the South.
Finally, within the Federal Open Market Committee's (FOMC) economic forecasts, we found that unemployment is expected to moderate at a slower pace of improvement. The Fed updated its unemployment rate forecasts for 2012 to 8.0%-8.2%, from 7.8%-8.0% in April; it raised its 2013 unemployment projection to 7.5%-8.0% from 7.3%-7.7%.
Clearly, the labor situation is indicating new economic stumble through these three data points, and certainly a tougher job market. Given the flow of general economic data has likewise reflected a domestic stall, and with Europe deteriorating as expansion in China slows, investors in cyclical industries had better take heed. Industrial commodity companies should be at the forefront of sensitivity should global economies stall, with risk highlighted in names like Alcoa (AA), BHP Billiton (BHP), Rio Tinto (RIO), Freeport-McMoRan Copper & Gold (FCX) and Vale S.A. (VALE).
This report also highlights softness in job openings at business services firms, and so companies at the forefront of trouble should include advertising agencies like Omnicom (OMC), The Interpublic Group (IPG), Focus Media (FMCN) and Lamar Advertising (LAMR). Employment servicers should also be impacted obviously, including Monster World (MWW), Robert Half International (RHI), Korn Ferry International (KFY) and Manpower (MAN).
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.