Don’t Fall for the Government Fake-Out

BY TONY SAGAMI

FEBRUARY 16, 2016

Washington, DC is pretty proud of the employment numbers it has been pumping out. Most recently, the Labor Department reported that the US unemployment rate dropped to 4.9% in January.

That’s an eight-year low going back to the 2008–2009 Financial Crisis.

The actual number of new jobs was a little on the light side, at 151,000 versus the expected 190,000, but most of the Wall Street crowd was impressed with the +0.4% monthly increase in wages.

Not so fast. As always, the devil is in the details, and the jobs situation doesn’t look so rosy beneath the headline numbers.

• Downward Revisions: The October and November jobs numbers were revised down.

• Would You Like Fries with That, Sir? Of all those newly created jobs, 96% were retail, leisure/hospitality and healthcare/social assistance. Social assistance? That’s largely people who help others understand and/or sign up for Obamacare.

Retail: +57,700
Healthcare/Social Assistance: +44,000
Leisure/Hospitality: +44,000

• Crash and Burn: One of the themes I’ve been touting in this column is the slumping transportation industry. In January, 20,300 jobs in the transportation/warehousing industry were lost.

• Good Old Government BS: The retail sector supposedly created 57,700 jobs in January, but that is the “seasonally adjusted” figure. The actual or non-seasonally adjusted number is a loss of 584,000 jobs!

• Wage Rise… Yeah, for Teenagers: That +0.4% increase in wages was nothing more than a bump in the minimum wages in 14 different states.

December 31, 2015: New York, West Virginia

January 1, 2016: Alaska, Arkansas, California, Colorado, Connecticut, Hawaii, Massachusetts, Michigan, Nebraska, Rhode Island, South Dakota, and Vermont.

Examples: The minimum wage in New York went up to $9/hour; in California and Massachusetts, it was raised to $10/hour.

• Poof, You’re a Worker! The labor force was said to have increased by 502,000 people, but that is more smoke and mirrors. The 502,000 increase is some cryptic “population control effect” the government conjures up every January. However, the “population control effect” was 218,000 jobs, which means the labor force actually grew by 284,000 instead.

As you can see, there is a lot of hocus-pocus in the labor numbers—but isn’t that the type of fun and games you expect from your government? So let’s take a look at the layoff report from Challenger, Gray & Christmas.

In January, a total of 75,100 layoffs were announced, a number not seen since January of 2009.

Oops! There is that 2008–2009 Financial Crisis again.

And on a year-over-year basis, layoff announcements are up by 41%.

But you know what number I paid the most attention to? The 146-point plunge in the Nasdaq Composite on the release of those “strong” jobs numbers.

The Nasdaq lost 3.3% of its value that day and closed at lows not seen since October 2014.

If you own companies whose business it is to help people get jobs, you might want to reconsider. I’m talking about companies like ManpowerGroup (MAN), Kelly Services (KELYA), Robert Half International (RHI), On Assignment (ASGN), Kforce (KFRC), and TrueBlue (TBI).

Or, if you are a more aggressive investor looking for ways to profit from falling stock prices, the above is a pretty good list of short-selling candidates.

For more information on bearish bets and my very best plays in that sector, try my monthly newsletter Rational Bear risk-free, with 3-month money-back guarantee.

Tony Sagami

30-year market expert Tony Sagami leads the Yield Shark and Rational Bear advisories at Mauldin Economics. To learn more about Yield Shark and how it helps you maximize dividend income, click here. To learn more about Rational Bear and how you can use it to benefit from falling stocks and sectors, click here.