The U.S. Economy Created 75,000 Jobs in May, Well Below the 180,000 Estimate… The unemployment rate remained steady at 3.6%.
What it means – Cue the calls for a rate cut, and sooner rather than later. The latest jobs number will leave President Trump, Stephen Moore, and the Wall Street Journal editorial board all telling the Fed “I told you so,” because they had roundly denounced the Fed’s last rate hike in December. The central bankers look a little caught out in the cold as they now consider lowering rates as early as next month, and Wall Street estimates the Fed will lower rates several times this year.
The employment numbers were modest across the board, with average hourly earnings up 0.2%, just shy of the 0.3% expectation, with hourly earnings up 3.1% for the year. The average work week remained steady at 34.4 hours, when the estimate was for a slight uptick to 34.5. But there was a little good news tucked into the data. Over the last year, average hourly earnings increased faster for production and non-supervisory workers, at 3.4%. That shows employees at the bottom of the labor ladder are moving up faster than other workers.
For those keeping up with the guesstimate game by the BLS, the statisticians were working overtime last month as they added 204,000 guessed-at jobs to the non-seasonally adjusted total for the month.
U.S. Factory Orders Dipped 0.8% in April… The report matched expectations, but the March 1.9% gain was revised down to 1.3%.
What it means – The orders split between non-durable goods, such as gasoline, and durable goods, or those that last at least three months. Non-durable goods orders expanded by 0.5%, driven by gasoline prices. Durable goods orders fell 2.1%, which matched the advance reading and shows general weakness in the economy. Core capital goods, or non-defense orders excluding aircraft, fell 1%. The weakness ran across all sectors, including metals, fabrications, and new vehicles.
The numbers might reverse a little in May, as car sales ticked higher and fuel prices rolled over. But there’s still general weakness across manufacturing, which could add to the stress at the Federal Reserve, where the central bankers appear to be mulling over a rate cut. Wall Street now estimates three rate cuts this year, implying one in July, September, and December.
Auto Sales Surprise Higher, Up 1 Million Annualized Units in May to 17.3 Million… The industry expected to sell 16.9 million, up from 16.3 million in April.
What it means – The good news in May followed an ugly April when auto sales fell to 16.3 million units. The average of the two, 16.8 million is in line with consensus estimates for a solid, but slower year of auto sales. The pop in May will add to retail sales and factory orders, which will be a bright spot among what many expect to be a slew of disappointing numbers.
At Two-Day Chicago Fed Conference, Bankers Discuss How Next QE Will Happen… The Fed governors didn’t discuss if QE works, just how much, and when, it should be used.
What it means – Admitting that they won’t have enough interest rate fire power available to fight the next recession because rates are starting at such a low level, the bankers discussed what else they will do. The bankers, including Chair Jay Powell, talked about how well QE worked last time, but should be rolled out faster, and bigger, than it was right after the financial crisis.
The bankers took it as a foregone conclusion that their efforts were successful in restarting the economy, even though it took more than six years and economic growth has remained anemic for more than a decade. But the point was clear. When the economy eventually rolls over, expect QE, and expect it to be massive and immediate.
More Immigrants Are Crossing the Border, and Fewer of Them Are Showing Up for Their Detention Hearings… U.S. Border Patrol reports it apprehended 132,000 people crossing the Southern U.S. border in May, including more than 83,000 people traveling as families. Older data shows that more than 65% of asylum seekers make their court dates, but a pilot program looking at those who arrived since 2016 shows 87% of asylum seekers do not make their court dates.
What it means – It’s no surprise that more migrants are coming our way. Through word of mouth, I’m sure they know that the door is open, and once you declare yourself to Border Patrol, you can get a temporary work permit and go live with family in the U.S. for around two years. It’s also no surprise that, among the huge influx that arrived in the last three years, less than 15% show up for court. If they know they won’t win, then why try? Just keep working until someone calls you out.
The blame doesn’t fall on the Guatemalan government or citizens, or on Mexico, or even President Trump. Congress has failed to create intelligent immigration reform, so we’re stuck with a hodgepodge system that satisfies no one. And this goes for both sides.
Neither party, when controlling both houses and the White House, addressed migration, and now here we are.
House Democrats Consider Censuring President Trump… Unable to see a viable path for removal from office through impeachment with a Republican Senate, House democrats are considering the next best thing, a censure. The move would be self-contained in the House, so no need for a Republican Senate to approve, and it could be done quickly.
What it means – Representative Ro Khanna (D-CA) said that the measure would show people that the House is holding the president accountable for misconduct, and that it would go on the president’s “permanent record.”
That last bit sounds like a threat from middle school. Trump’s permanent record? Of what, his time as leader of the free world? Chances are that the president wouldn’t just ignore such a thing; he’d embrace it and wear it as a badge of honor. At political rallies he’d yell that the Dems couldn’t get to him through impeachment, so they had to do something else that is weak and has no teeth. He’ll tell crowds that he beat up the Democrats so badly they censured him, which is meaningless. President Trump must be loving this.
Data supplied by Dent Research/Delray Beach Publishing
“When the facts change, I change my mind.
What do you do, sir?” ~ John Maynard Keynes
Our plan is “the plan will change.”
What is your plan?
Relative strength measures the price performance of a stock against a market average, a selected universe of stocks or a single alternative holding. Relative strength improves if it rises faster in an uptrend, or falls less in a downtrend. It is easily applied to individual positions in your portfolio and to sectors and asset classes.
WARNING: All e-mail sent to or from this address will be received or otherwise recorded by the Investor Resources, Inc. corporate e-mail system and is subject to archival, monitoring and/or review, by and/or disclosure to, someone other than the recipient.
This message is intended only for the use of the person(s) (“intended recipient”) to whom it is addressed. It may contain information that is privileged and confidential. If you are not the intended recipient, please contact the sender as soon as possible and delete the message without reading it or making a copy. Any dissemination, distribution, copying, or other use of this message or any of its content by any person other than the intended recipient is strictly prohibited. Investor Resources, Inc. has taken precautions to screen this message for viruses, but we cannot guarantee that it is virus free nor are we responsible for any damage that may be caused by this message.
Investor Resources, Inc. only transacts business in states where it is properly registered or notice filed, or excluded or exempted from registration requirements. Follow-up and individualized responses that involve either the effecting or attempting to effect transactions in securities, or the rendering of personalized investment advice for compensation, as the case may be, will not be made absent compliance with state investment adviser and investment adviser representative registration requirements, or an applicable exemption or exclusion.