S&P 500 recovery on 09/5/225: I believe that the S&P 500's recovery from the day’s low to close just 0.2% down, after a weak payrolls report of 22,000 only net new jobs in August is a perverse reaction anticipating lower interest rates, and is incorrect.
Bad news is bad news: Yes, the 10 year rallied from 4.17% to close at 4.08%, boosting the S&P 500 from the day's low, but weak jobs report confirms a 4 month trend of a softening labor market, it's not a flash in a pan. Further, I don’t see any catalysts for this trend reversing. The average four month payroll growth is now just 25,000, as compared to 185,000 in the same period last year, and 186,000 in 2024. And excluding the pandemic, this is the weakest monthly job creation since 2010.
A reliable job sector is showing weakness: Worse, job creation in non cyclical sectors such as elder care, healthcare, government and municipal services has slowed signifying real barriers to employment growth. Healthcare jobs have always been the growth engine and a reliable one in an aging population, thus the slowdown in this sector is foreboding. Employment in health care and social assistance rose by about 47,000 in August. That’s the smallest monthly increase since January 2022. It’s arguably a big warning sign for the wider labor market given the sector has accounted for more than 40% of all new jobs over the last three years.
Non-Farm payrolls was not the only sign – The JOLTS report showed slowdowns in job openings, unemployment claims have gone up and continuing claims remain high indicating that its getting tougher to find jobs.
What can the rate cuts do and not do?
It helps lower the 10-year treasury yield as we saw on Friday, which in turn will reduce mortgage rates and commercial business rates.
It will help housing the most, and ease financial conditions for commercial construction and business, but this will take time to filter through.
It does not directly help job creation
It will inflate assets, especially stocks, which is dangerous.
Avoid the FOMO and BTD impulses: Don’t jump in because the Fed will cut in September – that’s already priced in. The Fed will cut rates of at least 25 basis points, possibly 50 at the September 17 meeting, but cuts will take time to impact growth. What’s not priced in is a weakening economy and a much needed correction in an expensive market. Don’t chase the rally just on lower interest rates, instead understand that a weak labor market can nudge the country into a recession. To be sure, there has never been a recession with unemployment rates below 6%, and at 4.4% there are no alarm bells, but we’re trudging in the wrong direction. Trade policy uncertainties, AI productivity improvements and DOGE cuts are taking their toll on the economy. Rate cuts may briefly lift valuations, but you need fundamental improvements to sustain the rally. The AI, semiconductor and cloud sectors, have already reached high valuations, and I would bet on a broad market correction.
The Weak Payroll Report Of Only 22,000 jobs Is Bad For The Market And The Economy
byu/Fountainheadusa instocks
Posted by Fountainheadusa
19 Comments
Or continue with your documented investment plan and buy as determined by it
Ive been following stocks for 10 years. Stocks only go up.
Its the opposite.
It shows AI is taking over.
Jobs are done for. There will be no new jobs
Dude you are just trying to justify and inflict bearness upon the market
Market is always not rational!
The indices dont have a direct relation to the economy, it’S the share issuer’s corporate health, growth projection and guidance… good earnings… There are sectors of the SP500 (groceries) which will suffer but I am pretty sure that Nvidia and Palantir would not see any major price drops when unemployment hits new record highs. They arent high anyway, Germany has 3 million unemployed people within 80 million, the USA has 7.4 millions from 347 millions. Related to the total amount of citizens this is far lower than Germany.
It’s just that way, that nobody hires any more, the mass layoffs havent yet begun and might not begin at all. The tariff impact is heavily delayed, maybe 6-12 months. Remember… the black friday (thursday in the USA) in 1929 was just a kickoff, the S&P fell 50% the next 12 months.
“Bad news is bad news” is pretty simplistic. Not saying you’re wrong, just that the market was plodded higher with all sorts of bad news- covid comes to mind.
Calls it is
Nobody knows what the market is going to do. But I do know that it will occasionally get hammered. I keep some powder dry for when there’s blood in the streets, and buy, buy, buy.
The economic numbers look bleak, so therefore the market will surge another +15% from here lol
Markets went up during last recessions too. Thing is the fools who lose their jobs and liquidate 100% of holdings at any price to avoid homelessness NEVER EVER think they will be the fools.
I would focus on AI stocks that will keep powering through regardless of the economy and be based on AI spending
so IA is posting now ?
Bad job numbers is good for the market, at least in the short term. Fed pumping in money.
Think about Covid, 60% of the companies were closed and made little to no money an the goverment dumped in a bunch of money an the market did great.
Calls for the small/medium caps, money will just rotate
wallstreet thinks lower rates means higher earnings for companies, but wait until companies keep reducing their workforce until unemployment grows so high that companies will no longer have any consumers left. the rich can’t sustain the economy alone no matter how much money they have. the society collapses.
Agree.
Who cares, what else are people with money going to do with it, keep it under their mattress in cash and watch it fade away to inflation?
Doom and gloom again. Calls it is
You might be right OP. But jobs are for the poor. The stock market is for the rich now.
Except the market will go up when they cut rates. Wether you think it’s priced in or not