A huge jobs number last Friday … are we getting the full picture from this headline number? … more conflicting data from a headhunting firm … a big payday for Speculator subscribers

Last Friday, we discovered that July brought a surprise jump in jobs added to the economy.

Whereas economists polled by The Wall Street Journal had forecast 258,000 new jobs, the number came in more than double that, at 528,000.

Keep in mind, the experts botched it the prior month, too.

In July, we learned that the U.S. added 372,000 new jobs in June. That dwarfed the forecast of 268,000.

These back-to-back months of positive surprises suggests significant strength in the labor market. (Or significant weakness from our economic forecasting experts, but we’ll go with “labor market strength.”)

In fact, based on last Friday’s data, the number of people unemployed has finally returned to the pre-pandemic February 2020 level, which happens to be a 50-year low.

This is good news.

But then how do we explain the significant increase in the number of layoffs and/or hiring freezes today?

At the end of July, we listed many of the companies that have already laid off employees. It’s a long list.

Here are a few: Peloton, Re/Max, 7-Eleven, Vimeo, Tesla, Rivian, Gopuff, Microsoft, JPMorgan, Compass, Redfin, Coinbase, Carvana, Bird, DoorDash, Reef, Wells Fargo, Robinhood, Better, Netflix, Noom, Canopy Growth, Thrasio, Food52, Cameo, PayPal, Zulily…

Personally, I’m seeing this economic weakness show up in my own day-to-day routine:

A friend’s business just had to lay off employees… my favorite local restaurant went out of business two weeks ago… and my tailor says he’s on the verge of bankruptcy.

Bottom-line, we’re seeing starkly conflicting views of the economy.

What’s behind this apparent contradiction?

***We profiled one possible explanation after June’s jobs report

Last month, the June jobs report showed a huge payroll beat of 372,000 jobs reported versus 268,000 expected.

But there was a disconnect. The Bureau of Labor Statistics’ (BLS) very own June household survey found a decline of 315,000 jobs.

How did that happen?

Here in the Digest, we suggested that perhaps it’s because more people are working two jobs.

From UnseenOpp.com after last month’s jobs report:

Full-time employees declined by 70,000 since March while part-time workers fell by 326,000. Multiple jobholders, on the other hand, have surged to a post-Covid high of 7.541 million.

Multiple jobholders swelled by 239,000 in June alone opposite full-time and part-time workers, who fell by 152,000 and 326,000 last month, respectively.

But it gets even worse.

Multiple jobholders whose primary and secondary jobs are both full-time just hit a record high as well.

In short, there are far fewer people working than the last handful of jobs reports would suggest.

There has, however, been a sharp increase in the number of people working multiple jobs. This is reflected in the recent jobs beats, which count the number of total payrolls, not workers.

Is this dynamic playing out again with last Friday’s most recent jobs data?

Indeed, it is.

Back to UnseenOpp from last Friday:

Meanwhile, the number of multiple jobholders continues to climb opposite full and part-time workers.

In fact, multiple jobholders whose primary and secondary jobs are both full-time positions just hit a record high in July.

And so, really, the situation isn’t at all different from June.

***It seems we’re watching a tale of two economic workforces

On one hand, we have some Americans facing layoffs, resulting in an increasing number of workers taking on two jobs to make ends meet.

On the other hand, there are many job openings that need filling – to the point where we’re seeing wage inflation as employers try to coax would-be employees back to work.

It’s almost as though the strength in the higher-earning section of the economy is helping fuel the wage inflation that’s contributing to the overall inflation, which is hurting lower-income Americans the most (the latest CPI data shows inflation at 9.1%. The new print comes out on Wednesday).

This is the last thing the Fed wants.

From The New York Times:

Wage growth climbed more quickly than economists had expected in July, concerning news for the Federal Reserve at a time when officials are watching for signs of a sustained moderation in pay gains that could help to pave the way to lower inflation.

Average hourly earnings climbed by 5.2 percent in the year through July, more than the 4.9 percent forecast in a Bloomberg survey of economists, and its growth was revised higher in June.

Pay gains are still moderating slightly compared to very high readings earlier this year — they were up by 5.6 percent in March compared to a year earlier — but the pace of increase remains unusually rapid.

Fears of wage inflation and what it could mean for Fed policy is what drove markets lower last Friday.

***Meanwhile, when we dig into job-cuts data, things remain confusing

Challenger, Gray & Christmas is an executive outplacement firm that publishes data on job cuts.

Last week, it published its latest report, which – true to recent data from other economic reports – paints a mixed picture.

On one hand, U.S.-based employers announced 25,810 cuts in July. That’s a 20.6% decrease from the 32,517 cuts announced in June.

Good news.

However, the July job-cuts number is 36.3% higher than the 18,942 cuts announced in July of last year.

Bad news.

But so far in 2022, employers have announced plans to cut 159,021 jobs. That’s down 31.3% from the 231,603 cuts announced through July in 2021.

Good news.

But the 133,211 cuts announced in the first half of 2022 are up 21.9% from the 109,309 cuts announced in the last half of 2021.

If this is numbing your brain, mine too. Perhaps the easiest takeaway from these data echoes the point we made in the Digest last week:

We’re seeing mixed data, and that tends to signify an inflection point in whatever is being measured. At a minimum, it signifies a slowdown in whatever is being measured.

Now, an economic slowdown is exactly what the Fed wants. But as you know, the issue is: “Can the Fed slow things just enough to stamp out inflation without tipping the economy into a recession?”

Let’s keep our eyes on this. Between an unemployment rate at a 50-year low… but the number of people working two full-time jobs at an all-time high… with wages rising… at the same time that corporate layoffs are increasing… it’s tough to get an accurate read on exactly what’s happening in today’s economy.

We’ll keep monitoring it with you.

***Before we sign off, a quick “congratulations” to Eric Fry’s Speculator subscribers

Last November, our macro expert Eric Fry wrote the following to his Speculator subscribers:

…Today’s itty-bitty interest rates might not survive the new inflationary trend that appears to be underway.

Rising interest rates could become the new normal, which could be bad news for both stocks and bonds – but especially bonds…

Given this, Eric recommended that subscribers open a handful of inflation-hedge trades, which involved the ProShares Short 20+ Year Treasury ETF (TBF), the iShares 20+ Year Treasury Bond ETF (TLT), and the Invesco DB Commodity Index Tracking Fund ETF (DBC).

Last week, Eric recommended subscribers take profits on two of the trades; it was quite a nice payday.

From Eric:

As a group, the three hedge trades have performed admirably – delivering an average gain of roughly 150%.

“Admirably” is a bit of an understatement, considering this year’s bear market.

Congrats to the Speculator subscribers on this triple-digit winner. That said, let’s cross fingers that we won’t be needing more bearish hedge trades in the months to come.

Have a good evening,

Jeff Remsburg