The Recession and Market Breakdown is Almost Going as Perfectly as if I’d Planned it!
On a day when Zero Hedge notes that oil prices do go as perfectly as if Reuters plans them—going up whenever Reuters says they will and down when Reuters says down—I should note that I don’t have the power to move markets that Reuters does. I don’t even have the power to move my wife’s opinion of matters, much less move markets.
In fact, mea culpa, I was wrong about the price of oil this summer moving inflation, too. So, all is not perfect in the realm of my predictive capacity; but I’ll always admit the mistakes when the mistakes become clear enough; and, while oil did go up, it didn’t hold high enough for long enough to have a serious impact on inflation, and now its gone way back down. Other factors, however, are all applying the pressures up on the bottom side of inflation I’ve warned were coming.
Recession stall-speed indicator lighting up the 747 dashboard
Now let’s see where turns in data look exactly like the recession I’ve been saying we are already sliding into.
Let’s start with that turn in labor, which has somewhat done as I’ve figured, and somewhat given some head fakes that had me convinced it was turning when it suddenly showed it wasn’t. Today’s news makes the recent downturns look more solid … in a way befitting the recession I’ve said we are already in—bad enough, in fact, that Zero Hedge called today’s report “catastrophic.” (See headlines below for supporting subscribers.)
According to ZH, it was so catastrophic that it completely offset the government’s normal ability to manipulate the numbers—a little practice I’ve been pointing out for a long time from the Bureau of Lying Statistics. Sometimes the manipulations are so constant that they, too, become predictable. However, there is only so far, I suppose that the government can push the data with adjustments and maintain a thin veil of plausibility among, at least, unquestioning minds.
Last month, after the latest JOLTS report came in fractionally stronger than expected as the Kamala Department of Labor engaged in its usual data manipulation, this time by artificially inflating the number of government sector job openings, we made one prediction: expect a big drop in the next job openings report as the recent surge in government job openings quietly disappears.
Because that is how they do it: dress up the numbers in the current month, then take them back down to reality when no on is looking. ZH talks about the same pattern I’ve pointed out a lot where the Biden administration releases numbers that look good for the government, then when no one is looking a month later, strips out the manipulation with a downward revision so the accumulating total over the course of many months doesn’t get so far out of line with reality that the game is revealed by becoming too ludicrous to believe. And that is what we just saw happen with last month’s rosy scenario that I doubted when it came out.
That’s precisely what happened because moments ago, the DOL reported that in July the number of job openings plunged sharply to 7.673 Million – the lowest since January 2021 – from a prior month unrevised June print of 8.184 Million…
Since the big boost in July originally came from reported government jobs, apparently the government doesn’t even know how to count its own jobs, given how much it had to adjust its own jobs numbers down! Most of those July government jobs just became phantom employment.
…which also means that what was originally reported to be a beat to estimates of an 8.00 million print has since been revised to a miss of 7.910 million… but of course one month later nobody cares. Which is precisely how the Biden labor department has been operating all along.
It helps to have someone else who constantly notices the same thing you do just to keep from feeling like maybe you’re insane. After all, you wonder how all the smart heads that work Wall Street are failing completely to notice something so obvious.
As for the driver behind the last months of manipulated JOLTS “beats”, which as we showed was the artificially inflated number of government sector job openings, they did – as expected – tumble, from 1.016 million to 924K, while private sector job openings hit a fresh 3.5 year low.
Thus, some of those head fakes when jobs looked to be turning down but broke upward the next month turned out to be … well, the head fakes just about all turned out to be the original positive reports that later got revised down to match the downturn I finally expected to see. That is the woe-begotten situation of someone venturing economic predictions in a world of constant economic lies.
Let it suffice to say, jobs, with all revisions taken into account, have pretty well put in the expected turn that would be consistent with a forming recession.
As an aside, keep an eye on construction jobs: the number of job openings in this sector is in absolute freefall, plunging to levels not seen since late 2020…. Expect nothing less than an epic implosion of construction jobs in the coming months….
Ignoring the data manipulation, in the context of the broader jobs report, in June the number of job openings was just 510K more than the number of unemployed workers…. Said otherwise, in July the number of job openings to unemployed dropped to just 1.07, a plunge from the June print of 1.16, the lowest level since May 2021 and now officially below pre-covid levels…. The job openings data set was a disaster no matter how one looks at it…. Finally, no matter what the “data” shows, let’s not forget that it is all just estimated, and it is safe to say that the real number of job openings remains still far lower since half of it – or some 70% to be specific – is guesswork…. The actual [survey] response rate remains near a record low 33%.
And from CNBC:
“The labor market is no longer cooling down to its pre-pandemic temperature, it’s dropped past it,” said Nick Bunker, head of economic research at the Indeed Hiring Lab. “Nobody, and certainly not policymakers at the Federal Reserve, should want the labor market to get any cooler at this point.” …layoffs increased to 1.76 million, up 202,000 from June.
Dollar for dollar down
As for other lying data that I’ve been pointing out, another “dollar store” just joined the parade of businesses in deep stress because the consumer is shutting down, in spite of Bidenomic claims that GDP rose more than originally thought in the 2nd quarter due to strong consumer spending. Both Dollar General and now Dollar Tree saw big stock drops after warning that core conumsers are under pressure. And it is not just the bargain-shopping poor who are showing signs of duress:
Dollar Tree reported this morning that the macroeconomic environment is pressuring its middle—and higher-income consumers….
Chief Financial Officer Jeff Davis wrote in a statement that the “increasing effect of macro pressures on the purchasing behavior of Dollar Tree’s middle- and higher-income customers” was the main driver in slashing its full-year sales forecast.
Said Goldman Sachs:
the 20% guidance cut is worse than expected
And as for those AI stocks that could never possibly crash like the dot-com bust, Nvidia’s plunge yesterday ranked as the worst ever in US history! ‘Twas only a couple of months ago, you couldn’t throw a rock on Wall Street without hitting a stock advisor who would tell you the AI stocks could not possibly do what happened in the big dot-com bust because they would be driving the future. (Yeah, just like all the high tech companies that crashed hard in the dot-com bust that would be driving the future, too. They never learn.)
Flying uninverted at last
Well, for part of the day, anyway. One other data point that now aligns perfectly with recession is the Treasury yield curve. It finally uninverted today, which is something it typically does just before a recession begins. I’d argue it was late to the party, just like 3 years ago I said it would be late to showing the arrival of high inflation, which is something the yield curve also typically foreshadows, and it was, indeed, late in showing inflation, arriving well after inflation was soaring. The reason I said it would be late was that Treasury yields are held so fast in the Fed’s grip these days due to how many Treasuries the Fed holds and transacts that the yield curve can barely squeak out any message that the Fed doesn’t let it give. Price discovery has been lost by the Fed’s yield-curve control. It’s a totally manipulated market.
As a result, the yield curve inverted well after inflation arrived, and now it is reverting well after recession has arrived; but it is, at last, in the right place to flash its recession warning lights.