Well, it didn’t happen at all in the month of March, but after ushering in April with a shower of losses, the market rallied for its third consecutive session, led by the Dow Jones Industrial Average.

The blue-chip index, rebounding on the coattails of Boeing, is the would-be poster child of US-China trade. On that note, nothing has changed. We are in a trade war, and China has a multitude of unfair advantages that mock the notion of “fairness” and the abuse of trust that is supposed to accompany an honest exchange of goods and services.

I think America is going to win this battle, however.

As impressive as the week has been for the market, the chart underscores that there are additional challenges for the rally to get back on track. The Dow has rallied to a succession of lower high points and needs to close above 25,000 tomorrow to reverse that trend.

The U.S. Consumer: Richer, Smarter, & More Confident

Getting through 25,000 would be something, considering we get the jobs report today, and the recent volatility makes it more likely some traders will want to go home flat.

As for the jobs report, there are many hoping we will see a benign increase in net employment and a tepid wage growth. I would like to see the opposite because the American consumer has been spending, but also exhibiting the ability to self-govern their savings, making adjustments even as incomes increase.

This is impressive because consumer financials are in amazing shape even as overall debt increases.

According to the American Bankers Association (ABA), installed delinquencies fell across the board in the fourth quarter of last year for the first time since 2012.  These loans include various auto loans, home equity, marine, mobile, personal, mobile home property improvement, and RV loans. The overall composite declined to 1.64% from 1.68%.

Statement from ABA Chief Economist, James Chessen:

It’s rare to see delinquencies fall in nearly every category, and the levels continue to be very low by historical standards.

 The steady creation of new jobs has been essential to keeping delinquencies low, and we’ve seen more than 10 million jobs filled in the past four years.  Greater job stability and increased take home pay have allowed consumers to make more purchases while keeping balances low relative to their income.

Consumers are supported by a robust economy, and they continue to make judicious decisions when managing their debt levels.

Low delinquencies have held up for the most part in 2018.

Focus for Jobs Report

April 6, 2018

Charles Payne

I’m predicting 200,000 jobs and wages +2.7% year-to-year.

While the heads will focus on total job creation and the pace of wage growth, the glaring fault line in the monthly jobs report has seen the absence of young workers, many of whom abandoned the labor force or never entered, particularly young men.

This crisis was addressed by Jamie Dimon, Chairman, and CEO of JP Morgan in his annual shareholder letter:

Labor force participation – particularly among men aged 25-54 – dropped dramatically. An estimated 2 million Americans are currently addicted to opioids (in 2016, a staggering 42,000 Americans died because of opioid overdoses), and some studies show this is one of the major reasons why men aged 25-54 are permanently out of work.

Even worse, 70% of today’s youth (ages 17-24) are not eligible for military service, essentially due to a lack of proper education (basic reading and writing skills) or health issues (often obesity or diabetes).

Our schools are leaving too many behind. In some inner city schools, fewer than 60% of students graduate, and of those who do, a significant number are not prepared for employment. Additionally, many of our high schools, vocational schools and community colleges do not properly prepare today’s younger generation for the available professional-level jobs, many of which pay a multiple of the minimum wage

Here are the numbers and trends:

Ages 16 to 19 Labor Force

• Aug 1978: 9,903,000
• Feb 2018: 6,048,000

Ages 16 to 19 Participation Rate

• Aug 1978: 59.3%
• Feb 2018: 36.0%

 

A declining participation doesn’t just stop with teens, as we have witnessed labor participation among white men 20 years and older drift steadily to its current level, which is at an all-time low of 72.1% from 88.3 in 1954.

 

Participation trends are the best pulse of the economy, and it shows what people think about their own personal opportunities.  When lots of folks hit the bricks, it creates a buzz and excitement, and job opportunities materialize. It’s time for folks to get off the sofa and to believe again.

Quality of Jobs

Not only is this a remarkable number, but the composition of job creation also has shifted to higher- paying employment in the service and goods-producing sectors.

• 176,000 Service Sector
• 44,000 Professional
• 40,000 Trade
• 18,000 Financial
• 28,000 Leisure

65,000 Goods-Producing

• -5,000 Mining
• -31,000 Construction
• -29,000 Manufacturing

Goods-Producing

After peaking in 2014, goods-producing jobs collapsed. Now, these high-paying jobs are beginning to swell.

• +31,000 Construction
• +29,000 Manufacturing
• +5,000 Mining

Today’s Session

The jobs report released this morning from the government was largely a dud.  That said there were a couple of bright spots we’ll cover on the afternoon note.  More curious is Wall Street built in a narrative that good news would be bad news and a disappointing number has thus far been greeted with slightly more selling.

I don’t think the street is reacting to the back and forth between China and Trump on trade and when the final bell rings it will be comments from Jerome ‘Jay’ Powell today.  If he hints at just three rate hikes we could rally into the close.  Do not panic. 

 

Comments

Your prediction was wrong for the jobs report but similar to most people I WAS HOPING FOR BETTER FORTUNATELY TRUMP HAD ALREADY KILLED THE RALLY WITH HIS NEW TARIFFS OTHERWISE THE JOBS REPORT WOULD HAVE BEEN MORE DAMAGING I FEEL WE ARE IN A MARKET OF ROULETTE WE ARE WAITING FOR THE NEXT BULLET TO BE FIRED THE FAST MONEY FOOLS ALL JUMPED BACK IN WITH BOTH FEET UNFORTUNATELY I BOUGHT MICRON A COUPLE WEEKS AGO AND AM GETTING CLOCKED I THINK THE PARTY IS JUST ABOUT OVER IF THE FED RAISES AGAIN IT IS TAPS ernest remus on 4/6/2018 12:23:04 PM

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