An Ugly Jobs Report

Mar 8, 2019   //   by Bruce Mason   //   Weekly Market Update  //  No Comments

All three major stock averages are heading for their fifth straight day of declines in the wake of a disappointing jobs report, persistent uncertainty over China-U.S. trade talks, and Brexit.  This week we are reminded that the markets rarely go straight up for very long.  A certain amount of volatility is to be expected and a reversion to the mean is part of the cycle and not an exception to it.

Today started off on a bad note after U.S. non-farm payrolls rose a seasonally adjusted 20,000 in February, sharply missing expectations of 180,000 new jobs.  It came as a huge surprise which no one seems able to fully explain.  Some economists suggest the cold snap that paralyzed much of the country is to blame, while others believe the government shutdown played a hand in the decline.  The number is so low that investors shrugged it off as an anomaly and perhaps even an accounting fluke.  The last time the number was this low was in September 2017 and before that May 2016.  It does happen occasionally, but is typically a one-month event with a large bounce higher the following month.

In company news, it seems Amazon won’t be satisfied until it revolutionizes every industry.  Despite acquiring Whole Foods in 2017, it now wants to roll out a new grocery store format going head-to-head with Kroger, Walmart, and Target according to the Wall Street Journal.  This $1 trillion industry is certainly large enough to accommodate another entrant, however, margins are already exceedingly low and even a small decline in profits can send a company’s stock sharply lower, i.e. see Kroger down 15% this week.  Amazon’s ace-in-the-hole is its own private label which it hopes to capitalize on, putting pressure not only on other supermarket chains but also package foods and household product companies such as Kraft Heinz, General Mills, and Kimberly-Clark among many others.

Aside from the weak jobs report, we also learned this week that U.S. credit card balances hit a record $870 billion in December.  Balances grew $26 billion in the fourth quarter marking the first time credit card balances re-touched the 2008 nominal peak according to the Federal Reserve.  Also, 480 million credit cards are in circulation, up by more than 100 million (+26%) since its trough after the 2008 recession.  Before you hit the panic button, household debt is significantly lower than it had been leading up to the 2008 financial crisis and delinquency rates are not at heightened levels at this time.  The bigger concern, and one that I have mentioned before, is the U.S. budget deficit which swelled 77% in the current fiscal year (YTD).  The shortfall in the first four months of this fiscal year widened to $310 billion.

Ironically, among the other news that sent markets lower this week was China reporting lower exports.  In a nutshell, the good news is that the trade tariffs are working.  The bad news is that trade tariffs are working.  Beijing reported exports in February tumbled 20.7% from a year earlier, far below forecasts of a 4.8% drop.  I said ironically because analysts are suggesting that this drop in exports is indicative of a global economic slowdown.  Policy, meet consequence.

In closing, I want to tell you about special precautions, the kind executives take.  We all know high profile executives often hire bodyguards to protect themselves and their families.  What you may not know is the lengths some go to.  New details emerged this week about the security plan for Mark Zuckerberg, CEO of Facebook.  It seems given his notoriety, he faces severe threats on a regular basis.  Unlike many CEOs, Mr. Zuckerberg works at a regular desk on an open plan floor at Facebook HQ but is said to always be surrounded by undercover security who pose as software engineers.  Also, the company garage is located just beneath his floor, but parking underneath the CEO’s desk is blocked due to the threat of a car bomb.  Most interestingly, it is reported that Mr. Zuckerberg’s desk is located next to a bullet proof conference room with a panic button and perhaps more strangely, a rumored “panic chute” leading to the parking garage below.  Now you know.

March 8, 2019

Comments are closed.

Certified Financial Planner Board

CERTIFIED FINANCIAL PLANNER™ certification is recognized as the standard of excellence for competent and ethical personal financial planning.

Financial Planning Association

Members commit to objective, client-centered, and ethical financial planning.

Financial Times 300

The Financial Times presents the FT 300 as an elite group. This identifies the industry’s best advisers while accounting for the firms’ different approaches and varied specializations.

Paladin Registry

Paladin Registry provides comprehensive data on financial advisors’ credentials, ethics, and business practices.

MD Preferred Financial Advisor

Financial advisors that are uniquely qualified to work with medical professionals.

2014 Five-Star Professional

The Five Star award goes to professionals who provide exceptional service to clients.

Investor Watchdog

Investor Watchdog researches and monitors high quality advisors.