Recession Like Symptoms

Includes: DIA, QQQ, SPY
by: Markos Kaminis

It's just one day before the granddaddy of all jobs reports, the Employment Situation Report. Still, today's jobs data said something about the economy, and perhaps offered a warning for us. Weekly Jobless Claims were good enough to distract investors before the open, but did we miss a key economic warning in the Challenger Job-Cuts Report in the process? Let's not overlook the fact that the last quarter barely produced positive economic growth and that the previous Employment Situation Report to tomorrow's revelation showed deterioration in the unemployment rate. These are recession-like symptoms. So are we ignoring recession signs?

Weekly Initial Jobless Claims showed a 7,000 decrease in new unemployment benefits filers last week, as it fell to a level of 340K. The four-week moving average for jobless claims also decreased by 7K, as it fell to a mark of 348,750. That was the lowest point for the average since March of 2008, and I heard that while watching CNBC like the majority of traders who bid index futures higher thereafter. Unfortunately, that sort of erased from market memory important information gleaned from the Challenger Job-Cuts Report.

In its reporting of monthly job-cuts for February this morning, Challenger, Gray & Christmas informed us of a sharp spike in layoffs. It is information that certainly runs counter to the market's direction today, and it asks an important question about the economy, too. In the early afternoon, the SPDR S&P 500 (NYSEARCA:SPY), SPDR Dow Jones Industrials (NYSEARCA:DIA) and the PowerShares QQQ (NASDAQ:QQQ) were all in the green, though they seemed to be losing ground.

Maybe it's for good reason. Job-cuts increased by 37%, to 55,356, which is a rather high level and could offer another warning about the economy. After all, fourth quarter GDP was just revised barely into positive territory and last month's Employment Situation Report showed deterioration. Those are important recession-like symptoms, and hard to mistake for anything else.

Challenger said Wall Street drove the decline, with J.P. Morgan Chase (NYSE:JPM) announcing the most planned layoffs in the period (19K over 2 years). Late last year, Citigroup (NYSE:C) also announced a massive purge and Goldman Sachs (NYSE:GS) let hundreds go. Bonuses were up 8% this year on Wall Street, but the securities industry is getting leaner. It's conflicting information, considering securities industry profits were up this year roughly three-fold, to $24 billion, according to a report by the New York State Comptroller's Office. Wall Street tends to grow when the economic outlook is good, so is this yet another symptom of recession?

The housing industry is certainly not in recession, but perhaps it's a lonely bastion of an otherwise decimated fortress. It's hard to ignore the symptoms, whether they are on Wall Street or in the GDP data. And as for GDP, we expect forecasts for 2013 will be revised lower due to the sequester cuts. The Europeans quietly cut their own GDP forecast today. Has a sort of blindness come over us? The repercussions could be costly for investors considering how far stocks have come. Are we ignoring recession signs? What do you think?

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.