WASHINGTON – Stocks are up sharply Friday. US unemployment numbers for September actually plummeted to a 50-year low of 3.5 percent. That put some pep into every bullish step. Proof? As of 3:30 p.m., the Dow is up some 345 points, a 1.3 percent gain. This positive action unfolded despite all the negative headlines lately about how we’re headed for a horrible recession very soon. But today’s economic numbers seem to contradict The Swamp’s fervent Democrat-media fever dream. Namely, a nasty US recession shows up. And just in time to wreck Donald Trump’s re-election chances should impeachment mania fail to depose him first. So we have to ask ourselves today: What recession? Today’s unemployment numbers don’t show it.
No recession. Yet.
On the other hand, the increase in US payrolls – just 136,000 in September – continues to slow. So perhaps it’s not time to sound the “all-clear” recession siren just yet. Or so reasons a skeptical ZeroHedge piece. This one notes the yin and yang of things, including America’s ongoing “retail apocalypse.” One that statisticians blame for any current increase in unemployment.
The numbers, both good and bad
“Whether today’s payrolls report was ‘stagflationary’ – as wage growth hit a brick wall, stagnating sequentially and posting the worst annual growth in one year, or simply lousy, is debatable, but with just 114K private payrolls created in September (government added 22K jobs) one thing is certain: this was the 5th lowest private jobs print in the past 3 years.
“And yet, if one looks at the various job sectors, the emerging picture is hardly a dismal one, with 10 industries adding jobs, 3 losing, and one unchanged.
“Some of the highlights: manufacturing fell by 2,000 jobs, the third consecutive drop, while service providers added a four-month low 109,000 jobs; and while leisure and hospitality workers added 21,000 jobs, a six-month high, retailers cut jobs for an eighth consecutive months. Most notably, since reaching a peak in January 2017, retail trade has lost 197,000 jobs. Separately, government added 22K jobs, ‘not great, not terrible,’ even though census hiring was a surprisingly low 1,000 jobs.
“The composition of job gains was not great, with low paying jobs in the education and health category were the top addition in September at 40,000; meanwhile Professional, Business and Service jobs added 23.8K (ex-temp)…”
Retail employment: Not so good. Amazonification?
In particular, ZH zeroes in on the trend in retail employment, followed by a nasty-looking 12-month chart reflecting a significant increase in retail unemployment.
“Finally, the most notable trend was the continued decline in retail, where the Amazonification of America is accelerating, in the process destroying the legacy brick and mortar sector, which peaked in Jan 2017, and has lost jobs for 8 consecutive months, and 9 of the past 10, as the legacy retail sector is getting gutted.”
Clearly, this retail UNemployment trend is not our friend. ZH rightly points to the primary reason for this by offering us a perfectly suitable neologism: Amazonification. But I’ll discuss that journey in a future article.
So forget that recession obsession. At least for now.
$VIX and McClellan Oscillator settle down. For now.
Getting away from recessions and unemployment, there was better technical news Friday. The VIX volatility index declined nicely during Thursday’s surprise bull eruption. And, as I more or less predicted in Thursday’s article, we also got at least a dead-cat bounce off the waterfalling McClellan Oscillator. The bounce, if that’s what it is, seems bound to continue Friday afternoon. Although we always need to brace for Friday COB and Monday opening bell surprises.
Recession still on the way? Or is Mr Market merely “consolidating”?
Via the public area of Stockcharts.com, the generally reliable Tom Bowley plays the Mr Market’s (apparent) two-day uptick with optimism by simply perusing his extensive collection of charts. (Italics below are mine.)
“[L]et’s discuss the S&P 500. We’re consolidating. In a secular bull market, that’s fashionable. We went through this from 2014 through early 2016. This is simply the 2018/2019 version. Every downturn and we hear from the recession camp and the bear market camp. How many recessions have been called in the past 18 months? I just laugh….and so does Wall Street. The fear mongers generate the emotional selling and Wall Street happily buys their shares. And when the news hits its ugliest level, the stock market takes off.”
After pointing out the action in a number of charts, Bowley’s interesting conclusion – (and bold caps are his) – is as follows.
“So here’s my argument. First, there’s no jobs signal whatsoever that we’re heading for a recession. Second, if we do have a recession, my argument is that the stock market, other than a consolidating pause, will shrug it off.
“PAY NO ATTENTION TO CNBC AND ALL THE RECESSION FORECASTERS. IT DOES NOT MATTER!!!!”
So take that, CNBC! Actually, CNBC is okay except when it accepts the craptastic political slant that CNN and NBC pass down to it, the better to continue that network conglomerate’s 24/7 smear campaign against President Trump.
Interesting news involving shares of Crown Castle International (CCI), a cellphone tower REIT
Elsewhere in Stockcharts’ free section, Julius de Kempenaer makes a good case for rotating into (i.e., buying after selling something else) Crown Castle International Corp. (trading symbol: CCI). This is one of the more unusual stocks that were shifted into the relatively new S&P Real Estate Sector. That newish sector includes only those real estate investment trusts (REITs) that actually invest in physical real estate: usually houses, apartments, shopping centers, office buildings, etc.
Other REITs still remain in S&P’s financial sector. Namely, those REITs that are more or less strictly involved with mortgages and mortgage banking. Investors still get confused by this hair split, so I thought I’d mention it here.
What’s fairly unusual about CCI is that it largely builds, owns, and rents out space on cellphone towers. It’s a rapidly growing business that still has its ups and downs. Most investing services currently regard CCI shares as neutral-to-negative. But de Kempenaer also examines rotational charts and notes that CCI has suddenly jumped into the fast-growth or “leading” zone.
Future problems for CCI?
Some analysts fear that the micro-stations that will eventually form the short-hop backbone of incoming 5-G networks could hit tower leasing companies like CCI. On the other hand, towers won’t go away in the new 5-G era either. At any rate, the US is running way behind on deployment of 5-G anyway, so this appears to be a conjectural worry for the future.
And since the “future” in today’s stock market seems to be about 3 months or less – a calendar quarter – CCI could be a decent medium-term bet, particularly since S&Ps Real Estate sector maintains considerable leadership now in a market that demands lower and lower interest rates. Which means that REITs that actually buy and hold real estate, of whatever kind, continue to get swell interest rates on the money they borrow to buy all this stuff.
Wrapping it up
Who knows what kind of COB Friday document dump we’ll get this week from The Swamp? Sure, this might influence Monday morning’s open, if it happens. But more likely, Mr Market will be fixated on next week’s resumption of the currently stillborn US-China trade negotiations.
Meanwhile, September’s employment and unemployment figures are history until the next monthly report. And that 2020 recession might never actually happen. Or so we all hope.
Have a good weekend.
And stay tuned. And keep some cash in the tiller. I’ll be back Monday with the latest. If I can figure it out.