Recession signals in the labor market

Quiet details point to a downturn

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Today, we’re diving into recession signals in the job market, upcoming bank earnings, and the most bullish S&P 500 prediction on Wall Street.

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*At a glance:

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Jobs, hot CPI, and a 10% stock plunge

The March jobs report came in above expectations on Friday.

According to the print, the US added 303,000 jobs last month, beating the average estimate of about 214,000.

Stocks jumped, and some commentators saw it as fresh evidence for soft-landing outlook.

Yet, as we covered last week, the government has produced several sizable “beats” over recent months only to revise them lower after the fact.

“We think the jobs report was more like an April Fool's joke on Wall Street,” said Jon Wolfenbarger, a 30-year markets veteran.

He said that bodes poorly for the economic outlook and investors.

In a Monday note, he shared the following:

  • There are 9 million fewer employed people compared to the number of jobs

  • All of the March job gains were for part-time roles

  • Nearly 1.8 million full-time jobs have disappeared in the last four months, the largest drop since COVID

“Declining full-time jobs and rising part-time jobs are typical in a recession,” Wolfenbarger said.

Stocks, meanwhile, have also quietly lost momentum in recent weeks, according to ETF price gains and flows highlighted by Wolfenbarger.

That weakness could deepen, depending on Wednesday’s CPI report.

To that point, Larry Tentarelli, chief technical strategist of Blue Chip Daily, told me that inflation poses the biggest risk for investors.

He said a small uptick in CPI on Wednesday is plausible, and if that trend holds for multiple prints it may put rate hikes back on the table, even if policymakers don’t want to admit it.

“The Fed is still talking about rate cuts, but I don’t see it yet,” Tentarelli said.

“If I were the Fed, it’d be hard to talk about cuts. But I think there’s a lot of political pressure for them to avoid a recession before an election.”

While it might make more sense for the Fed to keep rates high, any changes in messaging could eventually spark a sell-off in equities, Tentarelli added.

Given the presidential election, however, he says the odds of that outcome remain low.

“Hypothetically,” he said, “if CPI and PCE comes in high for the next month or two, and the Fed came out and said ‘we might have to change our view and hike rates again,’ then i think the S&P 500 could see a 5-10% pullback, but that is not my base case.”


  • Tesla stock surged Monday. Shares jumped nearly 5% after Elon Musk’s tweet about unveiling a self-driving Robotaxi later this year. (

  • Bank earnings are expected to show declines. Reports for JPMorgan, Goldman Sachs and other financial names will shed light on the impact of high interest rates. (FactSet)

  • Wells Fargo strategists raised their S&P 500 outlook. The team now has the most bullish year-end forecast on Wall Street at 5,535. (Yahoo Finance)

Rapid-fire headlines:

  • Soaring prices for gold, oil, copper, and other commodities threaten inflation (WSJ)

  • Treasury yields aren’t acting like the Fed is done tightening policy (MarketWatch)

  • Jamie Dimon warns rates may stay higher than anyone expects (FT)

  • The rapid growth of private credit markets poses a risk to financial stability (IMF)

  • A former Fed official said he expects three rate cuts this year (Bloomberg)

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