Ursa Minor

The bears are stirring. Not yet rampaging, but there’s a lot of red ink across most markets.

Today’s jobs report was weak. No honey-coating it, it was a treat for the bears. Payrolls rose 142,000, well below the 200,000 expected, and a jump in government jobs hid a weaker private sector rise of 118,000. July and August were revised lower, so the employment picture weakened substantially in the 3rd quarter.

The unemployment rate remained at 5.1%, only because there was a huge (350,000) reduction in the labor force, bringing the labor participation rate to 62.4%, the lowest since 1977. About the only bright spot in the release was the broader U-6 data, which include both un- and under-employed: that rate fell to 10.0% from 10.3%, the lowest yet in this recovery.

With red ink spilling across global markets, sentiment has become pretty gloomy (see below).

The good news, from my perspective, is that sentiment is one of my favorite contrary indicators. Indeed, note in the chart above the coincidence of bearishness with market bottoms.

So, yes, the economy is softening in some areas—manufacturing, jobs—although resilient in other areas: auto production is soaring, housing prices and incomes are rising. A recession in the next 12 months seems very unlikely to me, although today’s data may spook members of the Fed to push out the date of their (modest) tightening. The markets now see March 2016 as most likely.

I continue to hold the view that US equities are in the midst of a multi-year bull market, where corrections, dips and gyrations should be expected. This is now a non-consensus view among the growing sleuth of bears which, as you might guess, I find encouraging.

• 20 Jun, 2023

  Beach Reading

  Most of you know that I don't favor romance novels for reading on the beach (or anywhere else, for that matter, although ...

• 22 Sep, 2017

  It's About Time

  Lost Time is never found again, advised Benjamin Franklin in Poor Richards Almanack. And Dante Alighieri observed, The ...

• 4 Sep, 2015

  Jobs

  Markets have taken today's employment release as evidence of a weakeningÂjobs market. A mere 173,000 net new jobs ...