The Average Joe’s Main Squeeze
The U.S. labor market is trending down. The number of jobs created in August fell 4 percent from the same time a year earlier, to 7.1 million.
The job numbers in June and July also fell. The last time jobs dropped three straight months in a row was in 2009.
New jobs are only averaging 161,000 a month this year, whereas they were 223,000 in 2018.
And the layoffs continue.
General Motors cut 49,000 workers in the U.S. and 4,500 in Canada, claiming as well that a “parts shortage” from strikes in U.S. caused another loss of 415 positions in Mexico.
Their talks are not going well with the UAW.
Mack Truck assembly plant workers are set to go on strike the week of 14 October regarding wages, health care and prescription drug coverage, and work scheduling. This is Mack Truck’s first strike since 1984.
Victoria’s Secret is letting go of 15 percent of employees from its Columbus, OH headquarters. Rather than blaming the slowdown as part of the “Pall on the Malls,” increased online shopping, and its dying brand, they absurdly blame its decrease in profits on its connection with Jeffrey Epstein, claiming shoppers are “at odds with the consumer tastes in the ‘Me Too’ era.”
Illustrating the severity of its slowdown, retailers hire, not fire, employees before the Christmas shopping season.
It’s No Secret
Beyond Victoria’s Secret, economic warning flags, as we’ve noted, are signaling trouble ahead.
A new study conducted by Harvard and the University of Chicago showed that when private equity companies take over public companies, employment drops about 13 percentage points over two years, mostly due to job losses when factories shut down.
This is not good news for the American labor force, seeing that public companies are being bought out at a record rate. These buyouts also contribute to a 1.7 percent decline in average wages at the target company.
Once envied across the globe as the land of the entrepreneur, the Bigs keep getting bigger. The number of public companies in the U.S. have dropped to 4,400 from 8,000 in 1996.
As the U.S. public sector shrinks, China’s expands. Doubled up from a decade ago and up tenfold over last two decades, there are now 4,800 public Chinese companies.
Home Free
Lowered interest rates are not putting potential homeowners into the home stretch.
Mortgage rates (averaging 3.57% the week of 14 October) are not linked to interest rates but rather to yields on Treasury bonds, which aren’t dropping at the same rate.
Since June, Treasury rates fell 0.4 percent but mortgage rates only 0.16 percent – the highest gap between these two rates in more than seven years.
Yet, with wages basically flat and burdened down with massive piles of debt, the “Own Your Home” trend remains on a downward trajectory.
Cheap Money, More Debt
Spurred by the low interest rates, U.S. companies are expected to sell more corporate bonds, as indicated by a 38 percent increase in September from the previous month for requests for corporate debt identification codes.
U.S. corporate bond issuance totaled $1.04 trillion, up 16 percent from the same period last year. Companies such as Apple, Walt Disney, and Coca Cola have been prompted to sell corporate bonds.
The rise in government-issued bonds is attributed to yet another Fed interest rate cut for third time this year, expected at the end of October… and, as we forecast, will bring them to negative/zero by November 2020.