It's not my intent to start the week on a downer, but there's nothing gained by sticking your head in the sand either. If you wondered why stocks starting selling off on back of what was billed as a “strong jobs” report on Friday... It’s because it wasn’t. Fake news. After the historically far more accurate ADP Report’s accounting of private employment showed the worst month for the labor market in two years, which was consistent with the daily drumbeat of headlines from high-profile companies saying they’re reducing hiring or outright cutting jobs...I smelled a rat with the BLS’ report which suggested something altogether different. It didn’t take me long to find it. The monthly government jobs report was much worse than met the eye. First you had downward revisions of job gains reported in previous months. Then you had the true story of what really happened during the month. 295,000 full-time employees were forced into part-time positions for “economic reasons”. When accounting for the downward jobs revisions and lost full-time jobs during the month, the number dropped from 390,000 jobs added to a net of 73,000 full-time jobs. That’s indeed the worst in two years since the onset of the lockdown recovery began. But wait, there’s more. Those two concerns aren’t the biggest issue with this report. The biggest concern pertains to household income relative to inflation. Here’s the good news, average incomes rose 5.2% year-over-year. Here’s the bad news, the average household fell further behind by the largest amount net of inflation in 41 years. Income growth is continuing to slow at a faster pace than inflation. With the most recent read on inflation at 8.3% (we get the May CPI report on Friday), the average household is 3.1% worse off today than a year ago. The only thing that would change that evident reality is if Friday’s employment report were to show much lower inflation in May than in April, but you’ve already paid for what happened last month. What do you think happened?
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