Lombardi: Stock Market Commentary & Forecasts, Financial & Economic Analysis Since 1986

Expect Pathetic Job Numbers for May As Well

Friday, May 11th, 2012
By for Profit Confidential

A sign of things to come…

Outplacement firm Challenger, Gray & Christmas released a report last week illustrating that, for the month of April 2012, planned firings at corporations in America rose 11% from a year ago. From the month of March, planned firings were up 7.1%.

The report also expressed the opinion of its authors that, at the current level of demand for goods and services, companies in the U.S. don’t require additional workers to meet output; very bad news for May’s upcoming job numbers report.

Sure, this means the U.S. economy is weak. Without sufficient demand from the consumer, which is 70% of GDP, companies will not hire new workers, which is going to stall jobs growth. This is a bad sign that May’s job numbers could be worse than April’s.

This is further confirmed by the fact that the biggest sector of the economy that cut the most jobs thus far in 2012 has been the consumer products companies. If consumers are not spending, then the companies that make and sell consumer products will not lead jobs growth, but instead lead in layoffs.

The report also highlighted that layoffs at the government level—led by education—continued to increase, which is something I’ve been talking about in these pages.

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As municipalities continue to cut the expenses to meet their budget deficits, jobs growth will be nonexistent at the state and municipal levels. And the monthly job numbers will continue to display the effect of this reality.

Challenger always prefaces its report by saying that a corporation’s intention to lay off will change if the economy improves, which will lead to improved job numbers. Given all of the economic headwinds I’ve detailed in these pages recently, like weak U.S. durable goods orders, weak job numbers and weak retail sales, the economy will most likely not improve.

Many are saying that April’s job numbers report was not the start of a downtrend in job numbers. I beg to differ.

Where the Market Stands; Where it’s Headed:

I believe the stock market has been putting in a huge top for months…what technical analysts call the right shoulder of a “head and shoulder” pattern.

The bear market knows that worldwide economic growth is declining rapidly…that Recession Part II is not far behind. It just doesn’t want investors to know, so they keep putting money into the stock market so the bear can take it away again!

What He Said:

“A low savings rate was eventually blamed for the length of the Great Depression. Consumers just didn’t have enough money to spend their way of the Depression. With today’s savings rate being so low, a recession could have a profoundly negative effect on overextended consumers.” Michael Lombardi in PROFIT CONFIDENTIAL, March 26, 2006. Michael started talking about and predicting the financial catastrophe we began experiencing in 2008 long before anyone else.

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Michael Lombardi - Economist, Financial AdvisorMichael bought his first stock when he was 17 years old. He quickly saw $2,000 of savings from summer jobs turn into $1,000. Determined not to lose money again on a stock, Michael started researching the market intensely, reading every book he could find on the topic and taking every course he could afford. It didn’t take long for Michael to start making money with stocks, and that led Michael to launch a newsletter on the stock market. Some of the stock recommendations in Michael's various financial newsletters have posted gains in excess of 500%! Michael has authored and published over one thousand articles on investment and money management. Michael became an active investor in real estate, art, precious metals and various businesses. Readers of the daily Profit Confidential e-letter are offered the benefit of the expertise Michael has gained in these sectors. Michael believes in successful stock picking as an important wealth accumulation tool. Married with two children, Michael received his Chartered Financial Planner designation from the Financial Planners Standards Council of Canada and his MBA from the Graduate Business School, Heriot-Watt University, Edinburgh, Scotland. Follow Michael and the latest from Profit Confidential on Twitter or Add Michael Lombardi to your Google+ circles