Stocks Lookout Below? A US Jobs Recession Underway?

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The ruin of a State is generally preceded by an universal degeneracy of manners and contempt of religion.

Jonathan Swift.

In the stock casinos, more wobble. Did the latest US jobs data just signal that the Sahm Rule on recessions is right and a new US recession is already underway? But did the BLS downwardly adjust the revision by another 100,000?

I think the US economy entered a new recession starting in either April or May and as the summer hiring season draws to a close, the pace of layoffs and pace of recession will pick up into the winter of 2024-2025.

Look away from that falling oil price and flattening US yield curve now.

Below, today’s news from Asia and yesterday’s news from the District of Crooks.

Asia markets mostly fall as investors assess business activity data from the region, Fed minutes

Published Wed, Aug 21 2024 7:56 PM EDT

Asia-Pacific markets mostly fell Thursday, with investors digesting flash business activity data from Australia and Japan while awaiting numbers from India.

The Bank of Korea has also held its benchmark interest rate at 3.5%, in line with expectations. The BOK noted in its release that inflation in South Korea has continued its downward trend, although it did point out that there was a need to monitor real estate prices and household debt.

This comes after the Federal Reserve released minutes for its July meeting, where the summary revealed that some participants made the case to ease rates at the July meeting instead of September.

However, “the vast majority” of participants at the July 30-31 meeting “observed that, if the data continued to come in about as expected, it would likely be appropriate to ease policy at the next meeting,” the summary said.

Japan’s Nikkei 225 was 0.24% higher, while the broad based Topix was down 0.15%. Japan’s business activity expanded at a faster pace in August, with the composite purchasing managers index climbing to 53.0 from July’s 52.5.

The country’s manufacturing sector swung back to growth, while its services sector saw a faster expansion.

South Korea’s Kospi reversed earlier gains to fall 0.34%, while the small-cap Kosdaq saw a larger loss of 1.39%.

Hong Kong’s Hang Seng index rose 0.35%, while mainland China’s CSI 300 lost 0.24%.

Australia’s S&P/ASX 200 rose 0.25%, after the country’s flash composite purchasing managers’ index in August climbed to 51.4 from 49.9 the month before, reaching a three-month high and underpinned by rising services activity, Judo Bank said.

In the U.S., all three major benchmarks gained after the Fed minutes reinforced hope for lower rates in the near future.

The S&P 500 added 0.42%, bringing the benchmark within 1% of its all-time record close. The tech heavy Nasdaq Composite climbed 0.57%, and the Dow Jones Industrial Average ticked up by 0.14%.

Asia stock markets: Japan, Australia, India PMI, BOK decision (cnbc.com)

Nonfarm payroll growth revised down by 818,000, Labor Department says

Published Wed, Aug 21 2024 10:37 AM EDT

The U.S. economy created 818,000 fewer jobs than originally reported in the 12-month period through March 2024, the Labor Department reported Wednesday.

As part of its preliminary annual benchmark revisions to the nonfarm payroll numbers, the Bureau of Labor Statistics said the actual job growth was nearly 30% less than the initially reported 2.9 million from April 2023 through March of this year.

The revision to the total payrolls level of -0.5% is the largest since 2009. The numbers are routinely revised each month, but the BLS does a broader revision each year when it gets the results of the Quarterly Census of Employment and Wages.

Wall Street had been waiting for the revisions numbers, with many economists expecting a sizeable reduction in the originally reported figures. The new numbers, if they hold up when the BLS issues its final revisions in February, imply monthly job gains of 174,000 during the period, as opposed to the initial indication of 242,000.

Even with the revisions, job creation during the period stood at more than 2 million, but the report could be seen as an indication that the labor market is not as strong as the previous BLS reporting had made it out to be. That in turn could provide further impetus for the Federal Reserve to start lowering interest rates.

“The labor market appears weaker than originally reported,” said Jeffrey Roach, chief economist at LPL Financial. “A deteriorating labor market will allow the Fed to highlight both sides of the dual mandate and investors should expect the Fed to prepare markets for a cut at the September meeting.”

At the sector level, the biggest downward revision came in professional and business services, where job growth was 358,000 less. Other areas revised lower included leisure and hospitality (-150,000), manufacturing (-115,000), and trade, transportation and utilities (-104,000).

Within the trade category, retail trade numbers were cut by 129,000.

More

Nonfarm payroll growth revised down by 818,000, Labor Department says (cnbc.com)

In other news. This time it’s different, right?

Why Some Americans May No Longer Be Rich

August 21, 2024

Home prices are higher. Stocks are higher. And so is the amount of money Americans think they need to feel rich. On average, they say it takes a net worth of $2.5 million to be considered wealthy. That’s a 14% jump from last year, when the Charles Schwab Modern Wealth survey found Americans thought it took only $2.2 million. “The notion of wealth combines both numbers and emotions,” said Rob Williams, managing director of financial planning at Charles Schwab. “The jump from $2.2 million to $2.5 million demonstrates both sides—the cost of living is rising, as are, it’s likely, most Americans’ more emotion-fueled views of what it takes to be wealthy.”

Perhaps unsurprisingly, the older someone is, the higher their definition of wealth is. Baby boomers said being wealthy takes $2.8 million, while millennials peg it at $2.2 million. Overall, slightly more than one-in-five Americans said they were “on track” to be wealthy—and 10% said they were wealthy already.

Here are today’s top stories

US job growth was apparently far less robust for most of last year than previously reported, putting yet more pressure on the Fed to cut rates next month. The number of workers on payrolls will likely be revised down by 818,000 for the 12 months through March—or around 68,000 less each month—according to the Bureau of Labor Statistics’ preliminary benchmark revision. It was the largest downward revision since 2009. The revisions suggest the labor market started moderating much sooner than originally thought.

And it would seem that some got the bad news earlier than others. At least three banks managed to obtain the payroll numbers Wednesday while the rest of Wall Street was kept waiting, whipsawing markets and sowing confusion on trading desks. After the Bureau of Labor Statistics failed to post its revisions at 10 a.m. New York time, Mizuho Financial Group and BNP Paribas both called the department and got the number directly. So did Nomura Holdings. Anger quickly mounted at competitors as word spread that the BLS was releasing the number to some firms over the phone.

Bloomberg Evening Briefing: Why Some Americans May No Longer Be Rich - Bloomberg

Fresh warnings Australia's economy could be on path to recession

22 August 2024

There are fresh warnings that Australia's economy is on a path toward a recession.

Australians who have hit the pavement in search of a job recently might have found it tough going, as bosses preference those already on staff for new roles.

"Companies are focusing, at the moment, more on their retention strategy than attraction," Robert Half director Nicole Gorton said.

"So if they have the opportunity to … upskill because there's an opportunity gap with somebody and they can plug that with the existing staff, they will do that."

This matches up with a new Deloitte employment report.

The accounting firm surveyed 84 chief financial officers — or those in charge of the books — from Australia's top 200 companies.

Deloitte partner David Rumbens said the feedback from those CFOs was that the private sector had entered something of a hiring freeze.

"So they've got some confidence with their own business performance but it's confidence that's coming out of demand increasing slowly over time, not so much out of increased employment," he said.

"They're seeing that they'll be able to cater to stronger demand through essentially the same workforce that they've got now."

Deloitte expects the unemployment rate, currently at 4.2 per cent, to peak at 4.5 per cent.

It said that means a further 101,500 Australians will become unemployed over the next 12 months.

Canberra University economics professor, Leonora Risse, said these numbers trigger the so-called "Sahm Rule" recession indicator.

"That formula is very much based on the US economy," she said.

It's named after the US economist who created it, Dr Claudia Sahm.

The indicator takes the average of the unemployment rate for the past three months.

If that average increases by 0.5 percentage points above the lowest unemployment rate recorded in the prior 12 months it means the economy has entered a recession or is on the path toward one.

"But if we look at the Australian data, if we plug those numbers into the formula, it's telling us that the rate of increase in Australia's unemployment rate would be consistent with a pattern that's heading towards a recession," Ms Risse said.

More

Fresh warnings Australia's economy could be on path to recession (msn.com)

Macy’s cuts sales forecast as department stores struggle to draw shoppers

Published Wed, Aug 21 2024 7:03 AM EDT

Macy’s cut its full-year sales forecast Wednesday, as the department store operator said it is contending with selective shoppers and more promotions.

The retailer posted a mixed quarter, as it topped Wall Street’s earnings expectations but missed on revenue.

Macy’s said it now anticipates net sales of between $22.1 billion and $22.4 billion, which is lower than the $22.3 billion to $22.9 billion range it had previously anticipated. That also would be a year-over-year decline from the $23.09 billion it reported for fiscal 2023.

Macy’s expects comparable sales, which take out the impact of store openings and closures, to range from a decrease of about 2% to a decline of about 0.5%. It had previously expected comparable sales to range from a decline of about 1% to a gain of 1.5%. That metric includes owned and licensed sales, which encompass merchandise that Macy’s owns and items from brands that pay for space within its stores, along with Macy’s third-party online marketplace.

The department store operator said in a news release that the new outlook range “gives the flexibility to address the ongoing uncertainty in the discretionary consumer market.”

In an interview with CNBC, CEO Tony Spring said customers aren’t spending as freely across all of Macy’s brands — even higher-end department store Bloomingdale’s.

“We see that there is definitely a softness, a carefulness, a delay in the conversion of purchasing,” he said. “And people on the things that they want, the things that are priced sharply, on the newness, they’re responding, but even the affluent consumer is not spending like they were a year ago.”

More

Macy's (M) Q2 2024 earnings (cnbc.com)

Ford changes EV plans, will delay pickup truck, axe three-row SUV

By Nora Eckert  August 21, 2024 2:44 PM GMT+1

DETROIT, Aug 21 (Reuters) - Ford Motor (F.N), opens new tab is reshuffling its electric vehicle plans, killing its three-row SUV and delaying its next-generation pickup while adding a new pickup and van to its future lineup as it adjusts to slower-than-expected EV growth.

The automaker will take a special non-cash charge of about $400 million for the write-down of certain assets for the previously planned three-row SUVs, which may also result in additional expenses and cash expenditures of up to $1.5 billion.

The slowdown in demand for EVs has caused automakers such as Ford, General Motors (GM.N), opens new tab and others to delay or cancel plans to avoid spending heavily on vehicles that consumers are not buying as quickly as anticipated.

Ford CEO Jim Farley has been touting the company's team in California which has been developing an architecture for affordable EVs. The first vehicle on that new technology will be a mid-size electric pickup released in 2027, the company said Wednesday.

"The work of this highly talented team has evolved into a critical enabler of our electric vehicle strategy. These electric vehicles will be lower cost, and not compromised in any way," Farley said in a statement.

Ford shares rose 1.4% in premarket trading.

The automaker will roll out an electric commercial van at its Ohio Assembly plant starting in 2026, hoping to capitalize on its success in the gas-engine commercial vehicle space.

Meanwhile, the long-awaited successor to Ford's F-150 Lightning electric truck is again delayed, now to the second half of 2027 from an initially planned 2025 launch, a move the company said will allow it to take advantage of lower-cost battery technology.

While Ford is shelving plans to produce an electric three-row SUV, it is moving to hybrid vehicles in that segment, aiming to woo customers with longer-range vehicles for road trips.

Ford changes EV plans, will delay pickup truck, axe three-row SUV | Reuters

Global Inflation/Stagflation/Recession Watch.

Given our Magic Money Tree central banksters and our spendthrift politicians, inflation now needs an entire section of its own.

The economy is flashing a recession signal that's only been seen 4 times in the last century, veteran economist Steve Hanke says

Jennifer Sor  Aug 20, 2024, 4:23 PM BST

The US economy is poised to enter a recession, as evidenced by a rare economic indicator with a perfect track record of signaling a downturn, according to top economist Steve Hanke.

The Johns Hopkins professor issued a bearish outlook on the US economy in an interview with the wealth advisory firm Wealthion on Tuesday. His forecast is tied to a troubling backdrop for the US on a big-picture level, Hanke said, pointing to the contraction in the money supply, or the total stock of money flowing around the economy.

M2, one type of the money supply, boomed during the pandemic amid loose monetary policy but has fallen over the past few years. The total stock of M2 money supply was around $21 trillion in June — 3% lower than its peak in 2022, when the money supply measured at around $21.7 trillion, according to Federal Reserve data.

An outright contraction in the money supply, which functions as "fuel" for the economy, is unusual, Hanke noted. It's only happened four times since 1913 — and was followed by a recession or an economic depression in each instance.

The M2 money supply began expanding again in June of this year, but changes in the money supply take time to work their way through in the economy, with a lag of one to two years, he added.

"We will enter a recession either late this year or early next year in the United States, and that's why we think the inflation numbers will keep coming down," Hanke predicted.

The outlook for a downturn is also supported by smaller, micro-level indicators in the economy, Hanke said.

The job market, for one, has been steadily weakening, with recession fears recently spiking after the unemployment rate spiked to 4.3% in July — its highest level since the pandemic.

Consumers also appear ground down by inflation and are pulling back on spending. Retail sales have slowed from their rapid clip several years ago, when at-home shopping fueled an American spending boom.

Certain areas of the economy already look to be in a slowdown, some forecasters have noted. Housing activity has been slugged over the past few years as high mortgage rates weigh on the demand for homes. Manufacturing activity, meanwhile, continued to decline in July, with the sector contracting for the 20th month out of the last 21 months, per the Institute for Supply Management.

"If you look at the micro data, it's kind of consistent with this macro, monetary picture that I just gave you, of slowing down going into recession, inflation continuing to come down. That picture is, if you look micro, individual companies or sectors of the economy … those sectors look like a slowdown is in the wind," Hanke said.

Markets remain on high alert for signs of a potential downturn. Investors think there's a 62% chance the Fed will cut rates 100 basis points or more by the end of the year, according to the CME FedWatch tool, a sign that traders anticipate the Fed hastily loosening monetary policy to avoid a recession.

Recession Outlook: Rare Signal With Perfect Track Record Is Flashing - Business Insider

The Harris/Trump Race To The Bottom of the Economic Policy Dumpster, Part 1

david stockman  Aug 20, 2024

Trump versus Harris is surely the most miserable presidential choice to ever come before the American people, and not just because both candidates present exceedingly obnoxious, self-obsessed personalities. The real pity is that American prosperity is under assault like never before, yet these cats are are truly in a race to the bottom of the dumpster of bad economic ideas.

To be sure, we were under the impression that it would be hard to come up with something worse than the Donald’s dog’s breakfast of protectionism, multi-trillion unpaid for tax cuts and Big Spending as usual with respect to both the Warfare State and Welfare State. But Harris’ growing pork barrel of spending and tax credit giveaways and proposed reign of Dem-style regulatory lawfare most probably does. We are referring, of course, to her recently proposed idiocy of attacking “price gouging”  in the grocery store and food industries, which would need to employ half the lawyers in the beltway to litigate its meaning on a case-by-case basis.

In any event, the place to start with respect to both candidates’ platforms is the fact that the rolling 12-month Federal deficit clocked in at $1.9 trillion in July—and at a moment of alleged full-employment.

Of course, the rapidly rising dotted blue line in the graph (which appropriately eliminates the budget gimmick owing to Biden’s student debt forgiveness plan) is just the warm-up, as it merely tracks what has already happened. Going forward, the annual deficit rises relentlessly to $2.9 trillion by 2034, with the additional red ink cumulating to $22 trillion over the period.

Yet that’s not the half of it. These CBO projections assume that various expiring spending increases and tax cuts will not be extended in the manner that Congress has done time after time at the 11th hour since time immemorial. So if you adjust for politics as usual, the deficits rise by another $6.5 trillion over the next decade. By 2034, in fact, the annual deficit is actually on a path toward $4 trillion per year.

Even then, as the pitch man on late night TV used to say—there’s more!

To wit, under pressure from UniParty politicians on both sides of the aisle, the CBO estimates employ a “no recession ever again” presumption and also assume that inflation quickly relapses to 2.0%, while the 10-year UST yield remains at 4% or under as far as the eye can see.

In short, bring in even modest dose of macroeconomic realism into the equation plus extension of the phony “savings” built into the budget baseline, and you have today’s $35 trillion public debt hitting the $65 trillion mark by the mid-2030s.

More, subscription required.

The Harris/Trump Race To The Bottom of the Economic Policy Dumpster, Part 1 (substack.com)

Covid-19 Corner

This section will continue until it becomes unneeded.

Mpox is not the new COVID, says WHO official

20 August, 2024

BERLIN (Reuters) -A World Health Organization official stressed on Tuesday that mpox, regardless of whether it is the new or old strain, is not the new COVID, as authorities know how to control its spread.

"We can and must tackle mpox together," said Hans Kluge, WHO regional director for Europe, in a U.N. media briefing.

"So will we choose to put the systems in place to control and eliminate mpox globally? Or we will enter another cycle of panic and neglect? How we respond now and in the years to come will prove a critical test for Europe and the world," he added.

Mpox, a viral infection that causes pus-filled lesions and flu-like symptoms, is usually mild but can kill.

The clade 1b variety has caused global concern because it seems to spread more easily though routine close contact.

A case of the variant was confirmed last week in Sweden and linked to a growing outbreak in Africa, the first sign of its spread outside the continent. The WHO declared the recent outbreak of the disease a public health emergency of international concern after the new variant was identified.

Kluge said that the focus on the new clade 1 strain will also help in the fight against the less severe clade 2 variety that has spreading globally since 2022, allowing Europe to improve its response through better health advice and surveillance.

About 100 new cases of the clade 2 mpox strain are now being reported in the European region every month, added Kluge.

Mpox transmits through close physical contact, including sexual contact, but unlike previous global pandemics such as COVID-19 there is no evidence it spreads easily through the air.

Health authorities need to be on alert and flexible in case there are new, more transmissible clades or ones that change their transmission route, but there are no recommendations for people to wear masks, said WHO spokesperson Tarik Jasarevic.

Mpox is not the new COVID, says WHO official (msn.com)

Technology Update.

With events happening fast in the development of solar power and graphene, among other things, I’ve added this section. Updates as they get reported.

Australia approves hub to export solar power to Singapore

21 August, 2024

Australia has given the go ahead for a massive solar and battery farm that would export energy to Singapore. The plan has been described as the "largest solar precinct in the world," by Canberra's environment minister.

Australia on Wednesday gave the green light to a A$20 billion ($13.5 billion, €12.138 billion) solar project that plans to deliver energy from a giant solar farm in the country's north to Singapore through a 4,300 kilometer (2,672 miles) undersea cable.

Environment Minister Tanya Plibersek said the "largest solar precinct in the world" would generate enough energy to power three million homes. She added it would include panels, batteries and eventually a cable linking Australia with Singapore, making her county "the world leader in green energy."

The 12,000-hectare (29,650 acre) operation known as SunCable is in Australia's sun-soaked Northern Territory.

The project is supported by tech billionaire and environmental activist Mike Cannon-Brookes and is set to provide four gigawatts of energy per hour for domestic use, with two more gigawatts sent offshore to Singapore.

"SunCable will now focus its efforts on the next stage of planning to advance the project towards a final investment decision targeted by 2027," SunCable Australia Managing Director Cameron Garnsworthy said in a statement, though it did not detail its financing plans.

In 2022, renewables made up 32% of Australia's total electricity generation while coal's at 47%, according to the latest government data.

Australia approves hub to export solar power to Singapore (msn.com)

Next, the world global debt clock. Nations debts to GDP compared.  

World Debt Clocks (usdebtclock.org)

Oh, what a tangled web we weave when first we practise to deceive!

Sir Walter Scott.