by Bryan Perry

February 6, 2024

The S&P and NASDAQ soared, and bond prices crashed after last Friday’s release of the January jobs report that blew apart even the most bullish of estimates. The Labor Department reported a whopping 353,000 new jobs with the 3-month average for total non-farm payrolls at 289,000, revised from 227,000, as the December job total gained 117,000 to 333,000 and November non-farm payrolls gained 9,000 to 182,000.

January’s average hourly earnings were up 0.6% (the consensus expected only 0.3%) versus 0.4% in December. Over the last 12 months, average hourly earnings have now risen 4.5%, versus 4.3% for the 12 months ending in December. The lower trend in job growth bottomed out in October 2023 and had been re-accelerating for the past three months, as implied by the upward revisions. (As a footnote, please note that there were some changes in adjustments that the Bureau of Labor Statistics has made to its data, which has critics of the BLS charging extreme data manipulation to generate this strong report).

As evidence that there may some data manipulation going on, the ADP National Employment Report, a measure of the monthly change in non-farm, private employment based on the payroll data of about 400,000 U.S. business clients coming two days ahead of government data, shows private payroll growth slowed to just 107,000 in January, well below expectations of 150,000 and off from the downwardly revised 158,000 in December. ADP reported last Wednesday: “Private payroll growth declined sharply in January, a possible sign that the U.S. labor market is heading for a slowdown this year.” ADP also said hiring was slow across virtually all sectors. Vocal critics argue the use of benchmark revisions, seasonal adjustments and population controls are all keywords for what we can only describe as statistical magic.

The latest Zero Hedge economic commentary also pointed to a “divergence between the Establishment (payrolls) and much more accurate Household (actual employment) survey. To wit, while in January the BLS claims 353K payrolls were added, the Household survey found that the number of actually employed workers dropped again, this time by 31K (from 161.183K to 161.152K).” The plot thickens, as the number of people employed has dropped in three of the past four months, including a drop of 683,000 in December. The Challenger Job Cuts Report showed layoffs of 82,307 for January, a 136% increase from December, a significant jump indicating layoffs are picking up. So, how can Friday’s job totals leap through the roof, counter to that of the ADP report, Household Survey and Challenger Job Cuts reports?

I don’t have an empirical answer, but these jobs data should harmonize, to a large extent, and they do not.


Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

The market’s reaction was many-fold, as bond and commodity prices traded down sharply, Treasury yields and the dollar traded solidly higher, with big-cap tech stocks leading the S&P to new all-time highs, while the Russell 2000 traded lower on a dim outlook for any kind of rate cuts soon. Companies beating Q4 estimates are getting richly rewarded, while those that miss are being sold off aggressively.

The odds of a March rate cut are now super-low, with talk of a rate cut in May now highly questionable. And despite all the euphoria surrounding a couple of big beats by the Magnificent Seven, there are dark clouds forming over some of the regional banks and foreign banks with too much of the wrong kind of commercial real estate exposure. For instance, Bloomberg reported last Thursday night that Tokyo-based Aozora shares plunged by as much as 18.5% to their lowest levels since February 2021 in Tokyo trading.

This Tokyo-based commercial lender said it now expects to post a net loss of 28 billion Japanese yen ($191 million) for the fiscal year ending March 31 after warning of U.S. commercial real estate losses. This report came on the heels of an earnings shocker out of New York Community Bancorp (NYCB) that posted an astonishing $522 million loan loss provision related to the acquisition of Signature Bank and Flagstar Bank. NYCB also slashed its quarterly dividend by 70% to a nickel. NYCB shares fell 40% in three days.

Justin Onuekwusi, chief investment officer at wealth manager St. James’s Place, said, “Banks are facing roughly $560 billion in commercial real estate maturities by the end of 2025, representing more than half of the total property debt coming due over that period. And commercial real estate loans account for 28.7% of assets at small banks.”

NYCB Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

Being that we are in a Presidential election cycle, markets tend to be optimistic, putting off unwelcome news into the following post-election year. There is also growing geopolitical risk and some fear of inflation re-igniting if supply chains face wider disruptions, and a federal debt bubble, but the U.S. economy is reporting economic data that generally supports a market that can add to its gains. And with the dollar turning higher, that only attracts further foreign capital flows seeking dollar-based assets.

With that said, at some point the market will care about these risks – just as it did last August through October, when the market swooned – and at that time, there will be a change in the narrative from buying the dips to that of selling into rallies. At present, however, there is a strong bias to keep buying any pullbacks in stocks of companies posting great sales and earnings growth coupled with bullish guidance.

Navellier & Associates does not own Aozora (AOZOY), or New York Community Bancorp (NYCB) in managed accounts. Bryan Perry does not personally own Aozora (AOZOY), or New York Community Bancorp (NYCB).

All content above represents the opinion of Bryan Perry of Navellier & Associates, Inc.

Please see important disclosures below.

Also In This Issue

Global Mail by Ivan Martchev
Bonds Are Once Again More Volatile Than Stocks

Sector Spotlight by Jason Bodner
When You Can’t Find Good Answers…Create Your Own

View Full Archive
Read Past Issues Here

About The Author

Bryan Perry

Bryan Perry

Bryan Perry is a Senior Director with Navellier Private Client Group, advising and facilitating high net worth investors in the pursuit of their financial goals.

Bryan’s financial services career spanning the past three decades includes over 20 years of wealth management experience with Wall Street firms that include Bear Stearns, Lehman Brothers and Paine Webber, working with both retail and institutional clients. Bryan earned a B.A. in Political Science from Virginia Polytechnic Institute & State University and currently holds a Series 65 license. All content of “Income Mail” represents the opinion of Bryan Perry

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