It's all about the jobs number tomorrow folks.
If the number looks anything like the jobless claims report today then it won't be pretty:
From Haver Analytics:
"The already weak labor market suffered an unexpected setback last week. Initial claims for jobless insurance rose to 479,000 from 460,000, revised up from 457,000, during the prior week. The latest level was the highest since early-April and just missed the highest since February. The four-week moving average of initial claims which smoothes out some of the w/w volatility also rose to 458,500, the highest level since early-July."
Ouch. These numbers are flat out ugly. You gotta wonder if all of these corporate earnings beats that we have seen recently are a result of slashing jobs versus increasing sales.
Many companies are beating estimates without seeing top line revenue growth. You have to wonder if they are sacrificing their workers in order to meet profit expectations.
The consumer data continues to point towards much slower growth so where else could the earnings be coming from? We got more poor retail data today that provided more proof that the consumer is on strike.
The only conclusion I can draw is companies continue to slash jobs and costs as they try and survive our Great Recession/Depression.
The problem here is you can only cut so much before it starts hurting sales and profits.
I predict that you are going to see a big drop off in earnings in the second half of the year as the consumer continues to deleverage. Many companies are now running about as lean as they can. You can only become so productive!
The fact that jobless claims are once again trending higher after all of the cuts we have already seen is staggering and very alarming.
I mean look at the graph above. At one point we were seeing jobless claims at 750k. Anything over 400k is considered to be recessionary. We peaked at a little above 400k during the last recession earlier this decade.
Our Great Recession/Depression has been destroying jobs for over two years now and it is showing no signs of slowing.
Perhaps we shouldn't be surprised these days when we see news like this:
"WASHINGTON — The number of Americans who are receiving food stamps rose to a record 40.8 million in May as the jobless rate hovered near a 27-year high, the government reported yesterday.
Recipients of Supplemental Nutrition Assistance Program subsidies for food purchases jumped 19 percent from a year earlier and increased 0.9 percent from April, the US Department of Agriculture said in a statement on its website.
Participation has set records for 18 straight months."
The Bottom Line:
The disconnect between Main St and Wall St has never been larger. The people in this country continue to suffer and things appear to be worsening.
Investors continued to pile into treasuries today. The 10 year yield ended the day at around 2.9%.
The market pretty much flatlined as it prepares for the jobs number tomorrow. It will be interesting to see how this report is spun if it's negative. I am sure they will use the "census worker" excuse if we get a bad print.
I think tomorrow is a big day. The volume has been anemic heading into the jobs number. This tells me investors are very concerned about where the economy is headed. When you see the jobless claims numbers you can see why.
I wouldn't be surprised to see some serious volatility after the jobs number tomorrow as the market begins to contemplate the idea that the economy might be heading back into a recession.
Mr. Market is also pondering the idea that deflation might be rearing it's ugly head.
I think by Q1/2011 we will see a negative print on GDP. The bond market is almost always right and its telling me that it sees the same thing.
Tomorrow will be interesting...Stay tuned.
Disclosure: No new positions taken at the time of publication.