Last week the Bureau of Labor Statistics reported that in May the US unexpectedly added a staggering 272K payrolls, which was 50% higher than the consensus forecast of 180K and 14K more than the highest Wall Street estimate (258K from Regions Bank). Wall Street really didn’t see this one coming as JP Morgan and Goldman were both below consensus average at 150K and 165K respectively. Wages were reported as going higher as well which indicates a strong labor market – but keep in mind, labor is one of the “trailing” economic indicators. The response from the bond market was a selloff as hopes of a near-term interest rate cut diminished. Stocks sold off a bit as well but held their own as the day went on.

Strangely the unemployment rate reportedly rose from 3.9% to 4% which doesn’t make sense when the jobs report was so strong. Looking under the hood of this report, things are looking much less than rosey. When we aggregate the performance of the labor market over the last few years, we get a better understanding of the dichotomy of the economic reports from the media and the significantly different view from financially struggling Americans.

The first thing further analysis of the jobs report uncovers is the difference between the BLS Establishment and Household surveys. The establishment survey counts payroll jobs while the household survey counts employees. So when you have people taking second and third jobs, one survey can look strong and the other can look weak. Now we have the biggest delta ever recorded between these two surveys – the chart being curtesy of ZeroHedge…

…and if that weren’t bad enough, we now compare data of American born employment and foreign born now working here – and the picture gets worse. Looking at just the past year, native-born workers have lost 668K jobs while foreign-born workers – and they are largely illegal immigrants –  have gained 934K jobs. When you look at a chart of the last five years it is fairly daunting…chart also from ZeroHedge.

The number of jobs occupied by people born in America has not increased in FIVE YEARS!! This is going to turn into a huge political issue if it is not already. We have huge border issues and if that recession finally hits that so many people have been anticipating, the political front could get dicey because many Americans feel left behind by the economy that we keep talking about hanging on surprisingly well.

Last week we mentioned that the restaurant industry is looking less than robust with some big chains looking tepid or worse with some potential bankruptcies pending. This week we want to show you some of the retailers that are looking pretty bad as well. Retail stores are being shut down at a staggering rate all over the country.  According to the Daily Mailnearly 2,600 store closings were announced during the first four months of 2024…Big names including Macy’s, Walmart, Walgreens, Foot Locker and 7-Eleven have all said they are closing shops. But discount stores like Family Dollar and bankrupt 99 Cents Only have been worst hit, as have drugstores like CVS and Rite Aid. If we stay on the pace that we are on, the total number of stores closed in 2024 will be nearly 40 percent higher than the total number of stores closed in 2023. This isn’t a booming economy to say the least – which brings us to our last data point for this week – credit numbers.

According to the Federal Reserve’s monthly consumer credit report, in April total consumer credit rose $6.4 billion, far below the median estimate of $10 billion, but more notably, the March number was shocking revised from $6.3BN to a negative $1.1BN, the biggest drop since last August.  However, the real shocker in today’s print was the April revolving credit print, i.e., credit card debt. At -$0.5BN, it followed last month’s puny $1.7BN, and was the first negative number since the covid crisis! in the six years prior to the covid crash, the US had recorded just 5 months of negative prints, and all tended to precede major drawdowns in the economy. The resilient American consumers appear to be reeling the spending in and we are raising our concern levels from an investment perspective. We certainly aren’t predicting an imminent market collapse, but the divergence of some of the numbers we have shown today are not sustainable indefinitely. Stay tuned.

Regards and good investing,

Greyson Geiler