What Was That?
As I try to put some reason to the employment data released by the Bureau of Labor Statistics (BLS) this (Friday) morning, I wonder. Hmm... does anyone here know just what the heck is going on? Job creation was awful, they say. 20K new jobs in a seasonally adjusted sort of way. Of course that's the establishment survey. If you prefer the household survey, the economy produced 255K new hires. What's a difference of 235K between friends. Let's make policy decisions, and trade off the numbers. Just type really, really fast. It gets better, gang... much better, and lumpier.
Wage growth was awesome. Hoo-ray. Year over year growth of 3.4%... month over month growth of 0.4%. Yeah, awesome until one bothers to stop and realize that hours were cut. That means employers are being cautious here. Certainly no aggression. Those working part-time for economic reasons declined by 837K, dropping U-6 (the under-employment rate) all the way from 8.1% to 7.3%. Does that make sense to you? I have my doubts. Certain segments within private industry, in particular the goods producing, and construction groups both considered higher paying, both took serious hits to headcount. Hmm.
On top of that, though headline unemployment dropped to 3.8%, there is tremendous inconsistency in the unemployment rate when broken down by race. Somehow, the unemployment rate for African-Americans climbed from 6.8% to 7.0%, while for Americans of Hispanic or Latino ethnicity, unemployment declined from 4.9% all the way to 4.3%... in one month's time.
To Be Honest
I am not sure how seriously one can take the data, given the tremendous inconsistency across nearly all data points. Maybe for job creation, we'll just go with the ADP print released on Wednesday for private payrolls. That print hit the tape at 183K. Maybe we just average the three... (20K + 255K + 183K) / 3 = 152.7K. Sound reasonable?
Remember that "very strong" January jobs growth number for non-farm payrolls that printed at 304K and everyone oohed and aahed? That was January's establishment number. It was revised up to 311K this morning. I am willing to go out on a limb here and state that most of you did not even know that for January, the household survey presented the new hire number as -251K. In other words, one of the surveys used by the BLS to determine monthly job creation hit the tape in a serious state of deterioration. If you are not a numbers nerd, you did not even know. It wasn't sexy. The media prefers the NFP number. Word to the wise... the ADP survey is at least derived by folks working in the private sector. Maybe just maybe, that number might be a little more consistent, a little less prone to error.
Yet again, growth is the bogey man. Yet again. Equity markets opened lower, led there by the Transports. Ryder (R) , Norfolk Southern (NSC) , JB Hunt (JBHT) , CSX (CSX) , Southwest (LUV) , Union Pacific (UNP) . All ugly. At some point, perhaps today, mangers will realize that the Fed is truly done tightening monetary policy for now. A softer Europe, a softer Asia. Now, a softer domestic economy. They have no choice.
Even with the higher rate of wage growth at 3.4%... the number still stands shorter than productivity (1.9%) plus consumer level inflation (Core:2.2%). Still not even close. The consumer is not okay, regardless of what you'll hear. It is still completely inappropriate to even consider raising rates anytime soon. They know this. They, at the central bank know that the speed of monetary tightening that they put the nation through in 2018 was a policy error. Either that or immoral. Benefit of the doubt, I'll go with error. The nation has yet to test the deep waters yet to be created by those policies. This may get much worse.
I wrote on credit card delinquencies this morning. Auto loan delinquencies are out their in enough size as well. Student loans will paralyze a generation financially. At least earnings will be there, right? Now, I chuckle as I write. Earnings growth will meet their match in the first quarter. Those numbers will be up against a very low bar come spring. They may in aggregate beat those diminished expectations. That is not what will rescue an equity market that deserves to be sold. What will, in the end, save these markets will be a return to the sloppy, easy way out policies of the likes of former Fed heads Ben Bernanke, and Janet Yellen, the ones who couldn't stop pushing on a string. Operation Twist. Thanks for the destruction of the yield curve. A $4.5 trillion balance sheet. What were you thinking? Were you even thinking? You can almost understand why Jerome Powell tried to rectify their mistakes in such a hurry. Almost.
Gold. Cash. Clean Water. Canned Food. Oh, and a nice balance of stocks impervious to trade, impervious to the strength of the U.S. dollar. I think every portfolio needs exposure to American tech. The cloud. Amazon (AMZN) , Alphabet (GOOGL) , Microsoft (MSFT) , Salesforce (CRM) . I still think we may have to put our dukes up. I'm hanging on to Lockheed Martin (LMT) , Raytheon (RTN) , and yes, I still have Kratos (KTOS) even after earnings.
Healthcare is political football. An investor can play that game. I trade it small. Let's call that game what it is... speculation. The banks? No, I don't think you need much exposure to the banks. That group is dead as a doornail with the 2/10 spread hanging around 17 basis points. Dividends gang. Like somebody who's going to like you back while trying to avoid firms engaged in quasi-appropriate buybacks. This is why I maintain healthy longs across the energy space.
Oh, by the way... have a good weekend. Now drop and give me seventy-five. Begin.
(Amazon, Alphabet, Microsoft, and Salesforce are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells AMZN, GOOGL, MSFT, or CRM? Learn more now.)