by Franklin J. Parker, CFA
The Summary
This week we see important data on the state of the labor market. As we explored in last week’s post, the labor market is a recessionary signal that we watch closely because it heavily influences the stock market. Analysts generally expect about 163,000 jobs to have been created last month, and the unemployment rate to hold at around 3.9%. Figures significantly different from these would likely push markets around — though they would be interpreted through the lens of “how will the Fed react to this?“.
We also saw data on manufacturing this week. For the first time in one and a half years, US manufacturing was not in contraction. I am not too excited about the figure, however, because it shows that manufacturing is at breakeven levels. If we see consistently improving figures in the next few months, I would take that as a positive sign.
Overall, the economy still seems to be sputtering. Earnings season is a couple of weeks away, and that will shed some light on whether companies are coming out of a short “earnings recession” or whether a real recession is not far behind. The S&P 500 just had a stellar first quarter, but without underlying fundamentals to support it, I wonder how long it can continue. In the end, I am still recommending caution — exactly what that means for you and your goals? Well, let’s grab some coffee and talk it through.
Chart of the Week
Bankruptcies are one of those data points that is giving me pause. In the last quarter of 2023, bankruptcies were 40% higher than the year before. A 40% increase in bankruptcies is in the recessionary zone, and, yet, we haven’t seen GDP growth slow significantly. Also concerning is how closely the “down-up” shape tracks the 2006 – 2009 shape.
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