Despite the furor over government job cuts, tariff chaos, and what not.
By Wolf Richter for WOLF STREET.
The labor market accelerated in March, after the moderate growth in January and February, despite the job reductions at the federal government, despite the chaos and uncertainty on trade, despite the sour mood of consumers that nevertheless spent like drunken sailors on new vehicles in Q1, despite all the things in the media to scare the bejesus out of everyone.
Total nonfarm payrolls in March jumped by 228,000 from the prior month, blowing past an entire range of projections, to 159.4 million, according to the Bureau of Labor Statistics today (blue columns in the chart).
The three-month average job creation, which includes the revisions and irons out some of the month-to-month squiggles, declined to 152,000 jobs, which is in solid territory (red line).
Civilian employment at the federal government – which accounts for less than 1.9% of total nonfarm payrolls – dipped in March by 4,000 to 3.0 million workers, after having declined by 11,000 in the prior month, bringing the two-month decline to 15,000.
This doesn’t yet capture the full effects of the job cuts so far: Workers on paid leave or receiving severance pay are counted as employed until they stop being paid, the BLS pointed out.
This relatively low ratio of federal government payrolls (3.0 million) to total nonfarm payrolls (159.2 million) indicates that the job cuts at the federal government, once they show up to the full extent, won’t make a major dent in overall employment.
This does not include employees working for companies that have contracts with the government. Their employees fall under the various nongovernment categories, such as “Professional and business services,” where employment has actually increased over the past two months despite some layoffs at big government contractors.
In March, this ratio of civilian government employment to total nonfarm payrolls dipped to 1.89%:
Average hourly earnings rose by 0.25% in March from February (+3.0% annualized), a slight acceleration from February but a deceleration from the hot increase in January of 0.42% (5.2% annualized).
The three-month average rose by 3.6% annualized, a slight acceleration from the prior month (red line).
Year-over-year, average hourly earnings rose by 3.8% in March, after having increased in the 4.0% range in the prior three months.
Unemployment ticked up by 31,000 to 7.08 million people who were actively looking for a job during the survey period, according to the BLS household survey today. Unemployment has been in this range since July.
The three-month average rose by 66,000 to 6.99 million and has also been in this range since July (red)
The headline unemployment rate (U-3) edged up to 4.152% (rounded to 4.2%) in March from 4.139% (rounded to 4.1%) in February. The actual increase of 1.3 basis points ended up looking like a 10-basis-point increase due to the effect of rounding.
Over the past 10 months, the unemployment rate has stabilized at the historically low range of 4.0% to 4.2%, with July having been the high point (4.22%) and January the low point (4.01%).
The unemployment rate = number of unemployed people who are actively looking for a job divided by the labor force (number of working people plus the number of people who are actively looking for work).
An unemployment rate of 4.2% is historically low, and a sign of a solid labor market, and below the Fed’s median projection at the March meeting of 4.4% for the end of 2025:
The Fed faces a peculiar mix of a solid labor market, inflation that has been accelerating for six months, uneven economic growth, and tariff chaos that it fears may add to persistent inflation as businesses and consumers expect higher prices in future years, thereby adjusting to higher prices – the “inflationary mindset,” as I call it – causing inflation expectations to become “unanchored,” which is one of the ingredients thought to allow higher inflation to fester. So Powell was fairly hawkish today, focused on inflation. And in this scenario, it seems markets may have to learn to stand on their own two feet?
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Thank you for a cogent post. People somehow think they are entitled to asset price inflation at all costs. Tiring.
Precisely — the endless discussion of various “puts” on the equity markets in particular is ridiculous. Knightian uncertainty is unavoidable — deal with it …
Just fine today. They’ll revise it much lower in 3 months when no one is paying attention anymore. Ministry of magic.
Three-month averages include all revisions. Always have, always will. So it doesn’t matter if you look at the three-month average.
There have also been up-revisions, for example, two big up-revisions in December and two big up-revisions in February for the nonfarm payroll increases; and a HUGE up-revision in overall employment in February.
But up-revisions don’t fit your narrative, so you don’t read them, and if you accidentally see them, you try to unsee them asap so that they don’t clutter up your mind.
I’m just commenting on todays surprising number that came the day after March set the third highest layoffs of all time, only surpassed by two months in early covid. They do consistently revise them, a lot more than before and I believe today will be no different, and likely an indicator of a weaker job market to come.
“…the day after March set the third highest layoffs of all time,”
what are you talking about? Are you adding in all the grandiose announcements on X about how many government employees they are going to try to maybe lay off by quadruple-counting everything?
It is amazing what people needing multiple jobs will do for the unemployment numbers. Ignore the fact that the employment participation rate is at its lowest point in 40 years.
Everything is fine. Buy the dip. Order Grub Hub and put in on the installment program. Best economy ever….
BS. In your comments, month after month, you post these inanities about the labor market to show that it is actually collapsing, and yet it keeps growing, LOL.
This time I will address this BS: “Ignore the fact that the employment participation rate is at its lowest point in 40 years.”
In fairness you used a narrow measure of partcipation rate. The total participation rate is in decline. This probably reflects boomers able to monetise their asset portfolios and retire early. This trend seemed to accelerate during Covid as people had time to reflect more deeply on life choices.
Obviously the overall rate has been declining for the past 15 years because boomers, a huge generation, have been retiring and after retirement by definition are no longer “participating” in the labor force. That overall measure goes from 16 years of age on up with no upper limit, so the growth of retired people over the years caused this rate to decline steadily since about 2006. And everyone knows that!!!
This overall rate is now at 62.5%, SAME AS IN 2015, and not anywhere near a 40-year low. That was just BS piled on BS.
This overall rate doesn’t tell us much about the labor force, but about retirement. That’s why everyone looks at the prime-age participation rate, of which I showed you the chart.
According to FRED the overall labor participation rate is 62%.
The last time it was this low was 1979.
This is just bullshit. Why do I have to waste my time with your BS if you’re too lazy to look it up?
Here is the overall participation rate, click on the FRED link you cited and look at it!!!!!!
https://fred.stlouisfed.org/series/CIVPART
1. In March, it ticked up to 62.5%, same as in 2015.
2. The recent low point in 2020 was 60.1%
And since you’re too lazy to click on the FRED link, to look at the chart on FRED, I’m going to MAKE you look at it here. So now, go try to unsee it:
Wolf, would you comment on how many people work multiple part-time jobs to make enough money to get by. Anecdotally, seems to be a real thing. I have talked to a number of these folks,
dishonest
Same clueless multiple-jobs-poor-Americans BS over and over again???
Many people have two or three work-at-home jobs, including highly paid tech workers, government workers (the WSJ had a great story on one of them, LOL), rich Google employees who have a portfolio of rentals that they take care of, etc. Not because they have to, but because they WANT to and because they CAN. There are 11 million mom-and-pop landlords in the US, most of whom have day-jobs, and so they have multiple jobs by definition. That’s reality, dude.
2000 points down! Yay!!
On top of 1400 down yesterday. Yay!!
If you only someone could have seen this coming 😃
2 or 3 trading days. The Dow is 38,000, 3400 is not even 10 pct. Still in the range of noise. It will be more telling if he have 50 points daily down for the next 20 or 30 days. That would tell use something. I’m not sure these seemingly big moves in points is anything more than drama.
I am surprised at BTC which has held up pretty well and is even green today. What does that say ? Anything ? Of course its down 17 or 18% from it’s highs a few weeks ago so maybe it says nothing.
If employment holds up then nothing really bad is happening.
If you think 10% loss is noise, I have some investment opportunities to sell you.
10% loss in 2 trading sessions may not tell us anything especially in the days of algorithms and automated trading. Weeks or months of persistent down tells us something.
I don’t buy investments from people trying to sell me.
If you think 10% down is serious, don’t read John Hussman’s musings on what it needs to go down to be back to normal.
We’re on the way to a bear market, or a 20% down from peak. Not quite there yet but it’s probably coming. Historically, they happen about once every 3.6 years.
I have to disagree with the suggestion that this is “noise”. If there is any solace, this one seemed inevitable from a CAPE perspective. That doesn’t excuse the unforced policy error. The last thing any politician should want is eating a bear market that can be tied to a policy choice.
As far as gyrations of Bitcoin…I side with it says nothing to a prudent investor. The asset class usually correlates with another irrationally valued asset class, tech, so it’s probably just dumb money shifting chairs on the Titanic until they get got. Just like I don’t read much into GME up today. Dumb money gotta dumb until the market relieves them of the burden of having assets.
S&P is at 17% below the high of less than two months ago, so almost identical to BTC. However, because recent gains have been so large, the S&P is now where we were just 14 months ago.
A ~20% drop happens every 5 years of so, so surprisingly routine and not really a cause for concern. Many of those stopped at 20-25% and weren’t too catastrophic. Once it passes 33% or so, then more widespread damage starts to hit (1929, 1932, 1938, 1968, 1974, 2000, 2008)
Don’t worry none, Andy. The shorts saw this coming and are making $$$$$$$$$$.
The recent stock price drop simply rubbed out the undeserved gains of the past year (the election bump), which matters primarily to the top 10% of wealth holders. So what, who cares.
The crying we hear is coming from Wall Street and its shills, not Main Street.
The S&P 500 is about back where it was a year ago. Who promised 20% returns every year, year-after year? Being flat for a year is a nothingburger. Try being flat for 40 years, such as the Nikkei had done, and now they fell off the wagon again. To be flat for two years, the S&P 500 would have to drop another 20% from here. And that’s just two years of gains unwound.
During the Dotcom Bust, the Nasdaq Composite plunged 78%, and it took 15 years and lots of money printing to get back to the level of March 2000.
People have gotten completely spoiled by these years of massive gains that drove lots of stocks to ridiculous levels.
Agree. Stock market is massively overvalued vs multi-decade, even multi-century norms. This is the trigger to the fall in stock prices but not the cause of it.
Here’s hoping home prices start falling somehow too as this family is still renting after moving states a few years ago because of outrageous inflation in homes way beyond rent inflation or income inflation.
I believe the outrage stems from the sense that these particular losses are unnecessary.
You have posted quite a bit about how you think tariffs are probably useful for the US economy as a whole, but I’m curious about your opinion on the broad based, large tariffs for everyone strategy being employed here.
There is certainly such a thing as too much of a good thing.
I just had this discussion with a guy in France: If you want to buy a base V-8 Mustang GT Fastback in France, it will cost you €126,000, or about $141,000, including tariffs, taxes, fees, and malus. That is prohibitively expensive. In the US, they’re $46,000.
We’re in an “inflationary environment” in which companies are able to increase prices and somehow buyers are able to pay.
I think Wolf’s mindset is colored by his experience as a vendor, and the understanding that a vendor can’t simply charge what he wants to achieve the profit margin he seeks. He can only charge what the market will bear.
I think the concern might be that tariffs in an inflationary environment will boost prices and customers will be willing to pay those prices.
I like how accurate you are always in your posts but somehow this slipped… You bundle together a bunch of taxes with the tariff, but let’s really break it down and let everyone judge (like you usually do):
– mustang price 59300€ which includes 20% sales tax and 10% tariff on import cars.
– 60k on high cylinder tax (applies to any car, for instance a nice Porsche)
To be 100% transparent, 10% still higher than what US had for EU cars (2.5%). But much lower than what Trump set as new tariff (27.5%).
“The Dow Jones Industrial Average bottomed out on July 8, 1932, at 41.22, an 89% decline from its peak on September 3, 1929. “
And it is possible this could be a 3 year grinding bear market.
There was a big drop in demand deposit turnover, the G.6 release, from Feb. 1930 until Jun. 1933.
Yeah, I am hoping to get opportunities to take on more risk between 4800 and 4300 on the S&P — otherwise I am keeping a relatively large cash position, thanks …
Suggest you might consider bee a bit more cautious re when to go back into ”risk” on S&P eg:
Been many times that stonks and RE have gone down more than 50%.
Remembering dad getting way over bought in RE in 1950s era, and losing all of it eventually after selling most to try to retain family home.
At this point, just trying to make sure beloveds will be able to at least survive, guess I am now a ””perma bear”’??
I love the Nikkei. The great counterargument to the dumb argument that you just hold US equities, you’ll for sure make money!
It can happen anywhere, just less likely to the US because it has such a huge market cap relative to its peers. But, yes, here too. That’s what you sign up for when you invest in equities.
Nate, those decades of flat Japanese stocks, were earnings growing, thus making the stocks lower and lower P/E? Or were earnings also flat?
Gattopardo,
I am not expert in Japanese stocks, so I don’t know. If you want more information, wikipedia has a good article on the Japanese asset price bubble. If you’re challenging my interpretation, just say so :).
Nikkei peak to trough comps are interesting, as are the time period to go back to the previous peak. It took around 25 years to get back to its previous high. Forget a lost decade, we’re talking lost decades. Uf.
So it is a great counterfactual to the idea US stocks will always go up! Buy the dip! Just buy and never sell! stuff. Japan’s economy was massive at the time and is still huge (ranked fourth).
Going with big is no substitute to diversification, along asset classes and geographic locations. I like carrying a healthy amount of cash and bonds that perform better when everything tanks out for an extended period, which can also happen from time to time. Total wipeouts are correlated when global trade nosedives, often in times of war but sometimes in other situations like a pandemic or perhaps now with a bonkers trade policy (speaking as someone who blames NAFTA & China’s admission to the WTO for killing domestic manufacturing, and thinks that tariffs have been a underutilized tool).
I’ve always been a dick. I can’t help it. Generally I try and stay away from these discussions. I have challenged many online economists. Stocks at what price compared to monetary expansion? So money is printed, and makes everything more expensive. Including stocks. Nothing is really changing. If money continues to manifest itself somewhere, then, somewhere it will go. It’s like we all wish a soda cost 50 cents again.
Try $0.05 D:
I can remember very well when I could put a nickel into THE coke machine, the only soda machine in several stores near, and get a 5 oz coke in a glass bottle with a serious cap needing a serious stroke to un-cap.
Also remember clearly when Pepsi came with the, ”Twice as much for a nickel too, Pepsi Cola is the one for you.”
Then, not much later, RC Cola and a lot of others for a dime…
Just another example of the FRB destroying the value of USD over the last century…
Don’t need to go to Japan as stated above the USA has had two approximately 15 year periods of going nowhere in the past 60 years. Retire in ‘68 or ‘98? Whoopsie. But what do I know. I’m invested in various instruments that yield 6.5% on average and living just fine no matter what the market does.
VVN, those 5 cent cokes were only 10 ounces! And they had a special ingredient in the solution. Made you feel good! Add an Almond Joy candy bar and you were set for the day!
When I was a caddie at 13 years old, the doctor I used to caddie for on Sunday used to buy me that combo at the turn. I’ll never forget that nice guy!
Dick, Somewhere in the middle 1960s, I’d get on my stingray bicycle ride into town to the local deli, and buy a hamwedge, a bottle of coke-a-cola, and a pack of bazooka chewing gum for $1.
S&P is up 6% since December 2021. Why do people always cherry pick a low price then say look! Still up 20% from two years ago! Yeah, it’s also only up 6% from over 3 years ago
Flat over time but there have been some big moves during those 40 years.
Just take a look at individual stocks that have had some huge moves.
Rakuten Bank has doubled in less than a year. A bank. Why? I don’t know.
Japan is still cheap compared to the IS market and many companies are in much better shape fro both profits and balance sheets. Banks, not so much.
Inflation in Japan after a brief spurt up is going to be heading down if the price of crude oil maintains its price falls.
That will reduce pressure on the yen and as more repatriation of funds to Japan increases it will add to increased demand and further increases in value.
Lastly, the BOJ can increase rates as the fall in the price of energy offsets the impact of the rate increases.
That will also lead to another reason for the yen to increase in value.
Btw, anyone know what Ackman is doing? Wonder if he is loading up on stock now just like when we are middle of Covid, take advantage of these buying opportunities
I imagine he is raising cash. His timing may depend on whether he got a good read on our current administration.
Go look at his latest 13F. After that he announced a sizeable position in Uber.
What Uber has done in the last five years is noteworthy.
andy
Very few saw this two-day implosion coming because the content of the tariff sheet was at odds with the rhetoric that preceded it.
Without encroaching on the politics of tariffs or tariff levels, the tariff sheet formula provided no basis for serious analysis, renegotiation and resolution.
It should not be controversial to demonstrate the lack of nuance, strategy and principle. Imposing a 10% tariff on countries with which the US enjoys a surplus. Placing tariffs on items that the US can never produce. Not factoring the opportunities presented to others to replace US exports hit by counter-tariffs. I could go on.
While virtually impossible to unpick, whatever the previous tariff arrangements were, having taken years to negotiate, they included quid pro quos.
This very latest turmoil is about execution risk and based on what I’ve seen, it could hardly be more extreme.
A blanket 10% duty is a garden variety revenue tariff unlikely to have a major impact on trade patterns…
kramartini,
I agree with your statement. It in no way addresses AB’s observation however. I really want the current administration to succeed on a number of the stated objectives. So far, the execution has been very worrying. Let’s hope the administration can learn quickly. More chaos and conflicting statements does not lead to more investment in domestic manufacturing. Ultimately, those manufacturers can simply wait out the administration.
2000+ and counting, although likely it will recover some before market close….where’s my FOMO peeps at? This is like once in a lifetime buy the dip moment, last time it was during Covid, don’t miss this golden opportunity before market hop back on the rocket to the moon. Guess the PPT time must be on an extended vacation or competely passed over at the bar…let’s get back to work by next week ok?
Btw, the labor market might be fine and all from data perspective but you know what they say…it’s a recession when your neighbor lose their job but it’s a depression when you it’s your turn. Definitely got a first hand experience on that as my wife got the laid off yesterday, how timely right after libration day…guess she got librated from her job too, although I am sure it was planned well behind this tariff annoucement, doesn’t make it easier…
Howdy Phoenix. Wait a little longer before you buy the dip. The Balanced Budget Battle Dip or NOT Balanced Budget Dip is coming……
Sorry to hear about the layoff – as a general rule, stuff like that really sucks.
Sorry to hear your wife got laid off. That sucks, but at least she can collect unemployment for a while.
Yes, only the people laid off know how brutal the job market is, I have friends with 1 year mark still interviewing.
Howdy Youngins. You should have expected a market correction, Buffett did. What about the novel idea, like hey, lets make a lot of our own stuff we buy and enjoy. I am already thinking about what I want to purchase next. Now only if I can find something made in America. Could be a Tesla since I heard about the fire sales on them……..
Sober Sailor
We pretend to work and they pretend to pay us
“Year-over-year, average hourly earnings rose by 3.8% in March, after having increased in the 4.0% range in the prior three months.”
That’s a good thing.
“And in this scenario, it seems markets may have to learn to stand on their own two feet?”
First they have to land. Right now the FOMO’s are still searching for the parachute release handle.
I’m interested in the FOMO crowd of business chiefs willing to invest multi-year to re-shore, given Fearless Leader’s consistency in edicts, even intra-day.
Here’s how it works. They make big “commitments” to please Dear Leader.
Dear Leader then runs to social media to brag about the GREAT WIN for America, with the commitment exaggerated by a factor between 2 and 5.
Then business leader goes on about business as usual, and will make good on some, all, or none of that commitment if it suits the company.
1. I dont want to start a problem or something. But I have a few doubts regarding the recent sell off
2. How low it will go? Just an educated guess, I am trying to time the market approximately. Like until Powell starts rate cuts or rates goes to zero?
3. What stocks are good to buy if the stocks go lower or when the rates are back to zero?
4. My idea is to buy some index funds like VHYAX or some dividend index
5. May be good stocks like GE, F, MPC or XOM, BAC and hold it longer
6. Will it be a Stagflation like 70-80s?
7. My comment might look stupid but not really politically motivated. I am all about Benjamin Franklin.
Cobalt Programmer:
I can tell you one method that is pretty much guaranteed to work. I started adult life with zero and i do mean zero. 10% of every piece of revenue was set aside for the future. first in a savings account until I had enough for mutual fund purchases. I did it decade after decade. Never failing-never selling. Today I would use EFTs. Today I am stinking rich. I do not know of a way to get rich quick but what I described is one way to significant wealth accumulation.
Wolf was just on video saying the market was too overvalued and too risky…..
You’re assumption of zero rates coming back is problematic to you making any Benjamins
Cobalt, no one can predict the future. The safest bet is cash. It was a long wait before we saw 3.5-4% returns.
The bet with the biggest potential payout over a decade is equities. What equities? No one knows. The bet with the biggest losses is equities.
Here’s what I’m doing. Nothing. But I’ve always planned for a bear market with a healthy amount of cash – and this isn’t my first rodeo with a potential recession. I went to this position during the first administration and did the same for the second. I dunno, just felt like might as well take some risk off considering this one historically BKs, so might not be good at his job.
When I was younger, I was all in on S&P 500 right before the GR. Didn’t sell a penny, ultimately vindicated, but learned an important lesson. Bonds and cash are cool too!
Thanks to Louie, American dream and Nate. I want to go the index funds route in the retirement account. May be bonds with the cash in hand.
The stock markets were way overpriced anyway. Now we can only hope house prices crashed even more so they can be affordable again. No tears for Wall St or speculators. I play the long term game and will buy when prices are reasonable again.
401K pension owners had no control over their investments–you throwing them under the ‘no tears’ bus too? Who is making out like bandits? That is the question. There will be no clawing back of that ill-gotten gain, as usual.
My first and only 401K gave clear option to put both my and company’s contribution into stocks or saving in bank.
Has that changed?
Don’t think so.
It depends on the 401K plan. At my current company, you have a selection of things to put your money in, money market, mutual funds, etc. That was it. It was pretty limiting. When I turned 59 1/2 I rolled over a big chunk of my 401K into my personal IRA. Which opened up my investment options to include treasury bills. I didn’t close my 401K, I still contribute the max into it. When the balance bets big enough, I roll it over into my IRA again. I’ve done this 3 times so far.
I hope we all get wage inflation, personally. We call those raises.
Doesn’t look likely. But no harm in hoping the tight labor policy gets tighter, as it’s a rough time to be a reseller of another country’s goods.
I’m positioning on a medium-ish to rough recession with a flat to mildly negative impact on housing. I think our trade policy is bonkers, so it’s likely that we see more layoffs than hires.
A note about housing – people thought they were the “safe” investment after coming out of the dotcom crash so whatever happens depends on whether people can cover their mortgage payments.
It’s a good time to buy stock in E.U.-based defense companies. Few people are going to buy US manufactured weapons systems moving forward – why give the US more leverage to extract concessions?
They’re steeply priced now. You’re late to that game.
Buy high, sell higher. Always been that way
I really doubt that those companies are selling the best equipment.
Overpriced and not up to date.
Question: who made the decision to close the NYSE after 911 for a week? Could it happen again if orderly trading ceases to exist.
The World Trade Center towers got hit before markets opened, and their destruction damaged the infrastructure and telecommunications links that markets need to operate, and so markets could not open.
“The Sept. 11 attack shut the stock market for nearly a week and revealed its vulnerability to physical destruction. While the NYSE building wasn’t damaged, many communications links were severed by the fall of the two trade towers. And the reopening of the NYSE was hampered by the Ground Zero recovery operation nearby.”
https://www.investopedia.com/financial-edge/0911/how-september-11-affected-the-u.s.-stock-market.aspx
Swamp, there are circuit-breakers for pausing markets, but nothing beyond that. But knowing how this administration works, under emergency powers I could see an executive order to halt trading. Bad idea, though. The breakers would achieve the same thing. The SEC could also ban short selling. Did that before for bank stocks.
Swamp, I worked the new commodity computer network in Chicago and a high medical research facility in the same town, post 9/11. A Federal security clearance was needed. Construction included massive concrete bunkers with cooling to encapsulate the transmission lines and segregate the research areas from explosive and fire destruction. Millions had to be spent and clear observance of engineering standards.
Did Powell just kill the “Fed Put”?
If so, FINALLY! And good riddance.
NO
Wolf, The fear is people losing money in their 401k and start cutting back on spending and that leads businesses to layoff and thus recession follows.
Yes, I said that too. But last time this happened (2001), it took 1.5 years of stock market rout before the recession kicked in. The recession came and went in the middle of the 2.5-year Dotcom Bust.
https://wolfstreet.com/2025/03/14/will-economic-detox-lead-to-a-recession-maybe-not-but-a-long-deep-stock-market-rout-will-see-dotcom-bust/
But what percent of Americans were invested in stocks during those years and what percent of their net worth was invested? Much higher now I’m sure.
Can’t count how many times today I heard it always comes back.
Sheep to the slaughter.
The top 10% of Americans by wealth currently own 93% of household stock market wealth. I don’t know the numbers during the dot com bust, but I don’t think ownership could have been too much narrower than that.
It’s interesting though, with all the gnashing of teeth reported the last few days it’s quite clear who has access to the media.
@American dream
“But what percent of Americans were invested in stocks during those years and what percent of their net worth was invested? Much higher now I’m sure.”
You are probably right, but do you remember Enron?
Aren’t we likely to see bigly labor market deterioration later in the year?
1. NVDA, AAPL, other tech darlings have crashed and their margins will be hit hard by tariffs. Capex will get slashed. Layoffs or at least hiring freezes are a-coming.
2. The hospitality/leisure will probably get hit hard too, as consumers face shock price increases and deteriorating real incomes due to tariffs on consumer goods like electronics and appliances.
3. Continued government cuts – we have the RIFs yet to hit; as Wolf points out a lot of folks are on admin leave or taking the buyouts, which means they will collect a paycheck until September.
3.
At some point, if the stock market continues to plunge, it’s going to trigger a recession. But it would take a much bigger drop than what we have now:
https://wolfstreet.com/2025/03/14/will-economic-detox-lead-to-a-recession-maybe-not-but-a-long-deep-stock-market-rout-will-see-dotcom-bust/
Translation: The Fed will not bail out anything that happens for the next 12 months. They’ll be hit with a combo of inflation and aggregate demand destruction.
The Fed put is gone.
You mean….the Plunge Protection Team (PPT)….is….gone???
Long-term rate is dropping, not raising. That’s a market signal that inflation is not a thing.
It could also be a flight to safety.
Or inflation is the old thing and depression is the new thing.
Winner winner chicken dinner.
The bond market is signaling a very gloomy outlook.
The 10-year Treasury yield at 4.0% is higher than it was in August, September, and the first half of October 2024, when the low point was 3.63%. Look at a five-year chart. The 10-year yield is in the middle of the range that is has been in since October 2022 when it went over 4% for the first time in this cycle.
So many people’s 401Ks ruined! But, they can still work some shit job and keep getting taxed!
How many of these ‘profit-taking’ episodes have I lived through, starting when we went off the gold standard? Ain’t capitalism great though.
Fortunately for me I bailed out many years ago.
Long time no see, Wolf, see you haven’t changed.
It will be nice to see an economic system that evolves past capitalism. I am sure people said fuedalism would never be replaced either. These things take time usually but as the popular expression goes “There are decades where nothing happens; and there are weeks where decades happen.” For now it appears nation state conflicts are the path taken but natural to pick an enemy rather than pick a better path.
Capitalism is economic freedom, the greatest single economic development in human history, the so called alternatives are all despotic human enslavement machines. And you can have Capitalism and a robust social safety network, the two are not incompatible.
10-4 H1:
TOTALLY AGREE!!
Mostly bigly problem is the vast and continuing ”propaganda machine” controlled by fancy folx who think they can maintain ”control”…
There’s no “evolution” past liberty. There is on devolution to the more ancient systems of feudalism, slavery, indentured servitude etc.
Wolf – is ‘Glen’ your alter ego?
Capitalism? Are you friggin kidding me? What we are witnessing today is cronyism, and insider trading based on market rigging and insider knowledge. It’s a casino where all the slots and tables are rigged in favor of the house. Don’t kid yourself, Glen.
Thanks for the sober analysis. Markets have been frothy for quite some time with PE ratios way above historical norms. Anyone who has run a private business and wants to make money wouldn’t want their profit to be be less than 4% which is a PE of 25 and equivalent to current interest rates. A PE ratio of less than 10 should be the goal! Seriously, why would anyone put in the effort for so little return? It’s clear our collective math skills are lacking.
Because it’s passive investing, Nicholas. It’s a lot more risk and time to build or buy a business then get some shares or fractional shares of whatever.
The markets are NOT a one-way street. You gotta jump on the highway baby where there are 3 or 4 lanes going both ways. You’ll get there faster. You can stay in the green regardless of if the Nasdaq or the Dow Jones are overall in the red. Look at it like boxing… when there’s heavyweights getting knocked down or KO’d there is always a bantamweight on that same card flexing his muscles. Microsoft, Apple, Google, Berkshire, Amazon, Nvidia, Tesla etc are the heavyweights but dont forget in that same ring on that same day its gonna be a lightweight like VXX, UVXY, VIXY, or DUST out there winning. Soon I’m gonna include a tip jar for saving a shirt or two that would’ve been lost due to obliviousness 🤣
I have to keep reminding myself that for every share of stock SOLD by someone it is being BOUGHT by someone else.
What do the buyers know or think?
BTFD
Yeah….Catch the Falling Knife.
CTFN. 😬
Ran out of money for buying the dip so often. Maybe I’ll get a cash advance from my credit card to buy more!
The media doesn’t understand the impact of DOGE cuts. While 20 to 25% of employees are being cut out of 2,000,000, 35% of contractors are being cut out of 20,000,000. The cuts to contractors will be felt more immediately. Existing contracts can be cut with one email from a contracting officer. The termination of employees is a slow process with severance delaying the hit to unemployment. Large and small companies are already cutting bench time and severance because declining revenue can’t support it. 80% of federal employees and contractors live outside the Washington metro area.
How could the labour market stats reflect something that has happened in the last week?
The announced job cuts started in January.
Are we in what could be Awful April, or will this end up turning into Terrible Twenties?? ❓
Hey! How did you get color in your comment? I don’t think I have ever seen that here.
I do that occasionally when I really really need to get someone’s attention: BOLD ALL_CAPS RED
Well, capital gains revenue for 2025 should be solid if this continues. There is a positive in that.
The problem is that it takes time for firings in private sector to filter through. It is happening but not showing up in the data yet. I will bet you Wolf that a very different picture emerged by end of April
Every month, on every labor market report, month after month, year after year, there always these comments that we’re already in a recession, and the signs are already here, sometime this, sometimes that, but the labor market data is “lagging,” it just doesn’t show the recession yet.
And then month after month year after year, there’s not recession, and the economy grows at a decent pace, and the labor market continues to grow at a decent pace.
I’ve had this site for about 15 years, and there was only one recession, and it wasn’t a business cycle recession but a lockdown. But throughout these 15 years, it’s always the same thing, month after month, the recession is already here but the labor market data is lagging…
Look at auto sales in Q1 … consumer spending is nearly 70% of the economy:
https://wolfstreet.com/2025/04/03/our-drunken-sailors-are-back-new-vehicle-sales-surge-in-march-after-rising-in-january-february-best-q1-since-2019/
All stock markets crash at some point. Curiously the last 15 years has been pretty much all up, with a pause during a Blackish Swan event of Covid. (Look how the Fed panicked with Covid, and last year with just one month of employment data which turned out to be wrong.) Anyway in March 2009, apparently before Wolf’s site, the S&P 500 was 666. It is now 5074, a 662% increase in only 16 years. I wish I could know the onset and bottom of the next crash. “Every year we get closer to it”, lol.
Gold is up 631% in the past 20 years in UD dollar terms.
Soon to be posted at the top of all of Wolf’s articles: “If you have a BRAIN, EXIT NOW.
Only zombies welcome.”
We’re going to get a big rally, and people will feel good again, until the next leg down hits them.
I have the same feeling: a big rally is coming soon. I am glad that I sold my SPXU and SQQQ on Friday.
Finger crossed now for the rally.
The markets are still far overvalued and looking for reason to correct.
Blame whatever you want, but this is all good and there was and still is plenty of warnings.
If you look at the august low and fridays low it’s the same. August was the start of the Trump Bump. Friday was the Trump Dump. Markets went up on the hope and promise of deregulation and tax cuts. And then oops. So far all that is lost is this last parabolic run up that had nothing to do with fundamentals.
I think one thing that is underappreciated (or misunderstood by me!) is that Trump probably has a limited window to get a “win”. Congress can vote to strip the presidency of his emergency authority anytime they choose and then it’s done because Article II.
Of course, right now everyone in R-land is playing nice because the party in power wants those tax cuts. After that, I think the clock starts ticking as only the safest seats want to risk going into a midterm during a recession.
Congress? That is hilarious. You mean those 535 kabuki performers? They don’t need to worry about anything. Only a handful are in districts or states where there are actual elections. The rest of them could be comatose and they would still get re-elected!
Yes, Congress will come together and stand up to the current administration to do what’s right and what’s best for the American people.
I don’t think sarcasm can be more obvious, but I should mention it…
I remember in 2001, market crashed first and unemployment came later. Same for 2008. Unemployment rate is a lagging indicator of a recession. Also, once it jumps, it goes up fast.
Unemployment is not a lagging indicator of a recession. A recession is defined in the US as a widespread economic decline and a declining labor market. You gotta have both.
But a big stock market crash or housing crash will CAUSE a recession. That recession starts with frazzled big spenders cutting back spending, including at the companies they own/run, and then when jobs get cut enough, that’s the recession. This happened about 1 year into the Dotcom bust. And after the recession was over, the dotcom bust continued for another year. It was mostly no recession outside of the tech areas and a depression in the SF Bay Area and some other tech areas.
Mr Wolf, I’m a naive student of 401k saver. I m also curious to Typecheck’s question: how you explain the phenomenon during Feb- March 2020? I had observed the Stock Market crashed and circuit breaking a few times during that period , routing till March 16th. Meanwhile the employment rate was high in February [or record high ?at least January 2020]. If people in Feb 2020 won’t believe or reject the idea that Umempolyment will last too-long, why they would sell like crazy?If Fed also believes the covid 19 lock-downs should be temporary [unemployment spike is transient, why FED would not trust the Market attendants to be realistic by themselves? Or why Fed and US gov should manipulate the Market by printing so much money till early 2022? Please excuse my poor English, but I m question is , or personal bias, you seems using past Months Umemployment rate for future 1.5year coming recession . But the phenomenon , or my personal view, during early 2021 period is not consistent with your statement. Although consciously known.: Covid lockdown Unemployment should or could be transient, however The Market , Fed, US gov all treated the The Transient period likes a recession.
I’ll just say this: The covid lockdown was a unique thing, and not part of a business cycle, and the recession it entailed was not a business cycle recession. It’s nonsense to compare it to a business cycle recession. There has only been one lockdown in my life, but there have been many business cycle recessions.
Greenspan overreacted about Y2K. And he never learned from Black Monday.
Two random employment comments:
1) hiring of software people in the Seattle market is dead. I’m guessing it’s not that much better elsewhere though I don’t really know. Anecdotally I was told by a soon graduating SW student his jobs professor told him to expect a very rough job hunt.
2) (I used to be in the staffing industry — 25+ years). The ASA staffing index has been trending down annually for the past couple of years. You can find it by searching “American Staffing Association Index”. It’s basically the demand for temp labor. The higher the number, the greater the demand. Temps are often the first ones in during an expansion (while employers try to discern if growth is real) and the first ones out as supplemental staffing gets cut before f/t hires. (Though that is not always the case, obviously). This slowing of demand often precedes a slowing of the economy. It’s not foolproof, just another metric.
The software industry has been in a slump for more than 2 years, since the collapse of SVB and other banks. Since then I’ve seen a fraction of the job openings circa 2022 and before. I think the tech job market is going through some structural changes, and there’s a lot of idiocy like “LLMs will replace all programmers”. Not likely, but it’s having an effect, and there have been layoffs, etc. I expect it to improve but not very quickly. A lot of the big companies over hired during and after covid and are shedding some excess, plus there isn’t the growth in the tech space that there was in the 2010s, AI hype aside. And it’s true, this would not be a great time to be a recent graduate looking for work in the field.
Yes software hiring is super competitive at the moment. There’s a lot of reasons for this.
1. Outsourcing to India – this is doing more damage than AI
2. 0% interest rates were driving tons of startup spending and thus demand for engineers
3. Flooding of the market with ‘new’ engineers aka everyone who was bored during covid and did a boot camp when demand was high.
4. Gen so makes it so current engineers are more productive so there’s no need to hire more.
It was always competitive though even during low interest rates. It’s a skills based position so 4-5 rounds of interviews taking multiple technical tests and doing take home projects to prove you can code.
I think over the next few years things will normalized and there will be more jobs, but tech interviewing will always be rough.
5. All the important consumer software has already been written. Microsoft Word, Excel and Access pretty much peaked 20 years ago. All the updates are pretty much re-arranged icons to make it look like something new was accomplished and confuse the user. Mainly its bloatware. I still use Quicken 1998, an old 1995 imaging software program, and DOSbox for small, fast, and smart DOS programs. Games, some commercial, and some internet stuff are all that’s left.
Software is now out-sourced to India and it is simply put together using pre-written software modules. You need some clever guys to oversee quality control, but not very many. What we need are more plumbers, electricians, and car mechanics, not more computer geeks.
“5. All the important consumer software has already been written. Microsoft Word, Excel and Access pretty much peaked 20 years ago. ”
Lol!!! that reminds me of the late 1980s when I was working towards my computer science degree. At the time I was 25 years old. One of my classmates was a 40 year who was updating his programming skills. I told him I was thinking of buying a new 286 computer. I asked if he thought a 286 would good enough for the next couple of years.
He said “You will never need a computer that is more powerful than a 286!!”
🤣
thurd2
” All the important consumer software has already been written. Microsoft Word, Excel and Access pretty much peaked 20 years ago. All the updates are pretty much re-arranged icons to make it look like something new was accomplished and confuse the user. Mainly its bloatware.”
Amen
Just spend 100 hours working with Office 365 to do some critical work, and to learn how to use this monstrosity. It is so complicated and over engineered to the point of total frustration to an experienced user like myself. I gave up after Microsoft cancelled my license because they would not let me update it and even pay for it. I went back to a version on the same package which I had Office 2003 on a CD and installed it on another Win 7 machine. Its works fine and is a lot easier to use than Office 365, and does everything I need to do.
Lol. No it’s not all put together using pre-written modules unless you’re doing web design for a mom and pop business.
And no one’s trying to sell direct to consumer software. But software is in everything. Your streaming services, your air pods, lots of break throughs in medical technology, your home thermostat, your car, when you swipe your credit card.
Harvey, you are talking about hardware. I am talking about software. Big difference. You should know that.
Swamp, I was using Access 2002 until just a few months ago when I decided to upgrade (or downgrade). It is definitely superior to Access 2024 or whatever they call it now.
The March unemployment numbers are before and the stock market falls are after Liberation Day.
On 15-16 October 1987 we had the Great Storm in the UK which cut off our power and phone. I remember the stock market sounding bad on Friday 16 Oct., from the radio, but I couldn’t do anything. On Monday 19 Oct. the US stock market fell 23%. I always remember that when there’s a big fall on a Friday.
(I went to 100% cash in December last year.)
The knock on effects of Trumps programs are just getting started with lots more downside to markets and tons of volatility.
I’m involved in automotive supply chain up in the Detroit-Windsor area and the amount of companies that weren’t prepared for these tariffs has surprised me. I haven’t heard of any mass layoffs yet other than those in Ontario, but we’re all preparing for the worst. All capital improvements on pause, marketing budgets pulled. It feels like March 2020 here. The next couple jobs reports will be very interesting.
If Trump really expected the tariffs to be long term he’d have pushed to cut the corporate tax rate. That he didn’t tells me as he’s pretty much explicitly stated, he’s ready to make deals.
He’s operating from the principle he always had— if you owe the bank a million bucks, it’s your problem. If you the bank a billion, it’s the bank’s problem. Tariffs hurt the other countries more and he expects they’ll be ready to deal.
Looking at the trade deficits, I think its pretty clear that China and the EU need our market otherwise their economies risk big downside. Mexico realizes this and seems to be looking forward to being cooperative with the administration. Canada on the other hand, has too much pride and got their feelings hurt. Hopefully, they will simmer down and come to the table.
MW: Hedge funds hit by Lehman-style MARGIN CALLS sparking doom loop fears
President Trump’s widest-ranging tariffs to date took effect on Saturday, as hedge funds continue to grapple with massive margin calls.
But maybe they were also short, and are making a killing?
Perhaps a few are doing just that in this unruly irrational market environment these days. Game Stop was up 11% yesterday!
@wolf can a couple months of stock market decline cause unemployment though? What I’ve seen lately in tech is any time there’s a significant stock price decline it’s cost cutting and layoffs to get the stock price back up since everyone high up has a large % of their compensation in stock? And because they tend to be replaced if the companies stock isn’t performing well. It never seems to be like the whole market is down, that makes sense let’s just wait this out.
This was a great read, very easy to digest.
Plus your old tried and true recession indicator article from a while back…
https://wolfstreet.com/2023/09/07/my-favorite-recession-indicator-the-next-recession-moves-further-out-of-sight/
Continued claims > 2.6M …. not even close just checked on FED site 1.87M
https://fred.stlouisfed.org/series/CC4WSA
So I have a few concerns.
The meme for the last 30 years is that we have been exporting our inflation. So now the idea is to bring all (most?) mfg. back to the U.S.
Aside from the impact of the current tariffs which will raise the cost of living, it would appear to me that prices will remain high going forward.
And as the mfg. is brought back on shore the construction of new factories (when finally completed) will most definitely include a lot of robotics. Will people still have money to spend after the loses?
Oh, one other concern. This is global btw.
“if the U.S. sneezes, the rest of the world catches a cold”
I fear destabilization of some places of which some have nukes and not many barriers from just one person making ‘the decision’.
Looks like Nvidia is heading for inclusion in Wolf’s list of imploded stocks, as the AI revolution crashes along with the stock market.
Lots of people here are preaching stock market doom and gloom. Maybe you’re right. But the individual who implemented these tariffs has a track record of shock and awe, chaos, and obsessing with something one day, only to lose interest the next. He has a history of seeking personal enrichment through manipulating things through his power. He does one thing today and then the opposite tomorrow. He negotiates by starting out with insanity and then dialing it back to seem more reasonable. He’s extremely proud and can’t stand to be seen as someone who is failing to do a good job. Could the tariffs be the latest example? Time will tell. I’m skeptical.
He declared BK business properties, including properties he put his name on, six times.
Usually people who can’t stand being seen as not doing a good job are not heavy users of chapter 11.
That’s true, Nate. But he also seemed to care a lot about wall street and the economy looking good, at one point. And he seemed to care about the WI supreme Court outcome, and I imagine he’ll care about the midterms too. Smells like a classic flip flop to me. This is how he “negotiates.” Maybe the sky is falling, or maybe people should consider whose policy they’re taking so seriously.
Companies are now hiring directly instead of employing staffing agencies that accept suspect paperwork and documents, which will just add to inflation.
Traders are buying long term Treasuries (30 years) on 10 to 1 leverage in anticipation of a recession and falling interest rates across the board. They could make out pretty well if their bet on a recession pans out.