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Do Recent Layoffs Point to Looming Recession?

Do Recent Layoffs Point to Looming Recession?

Posted On September 11, 2019 1:59 pm
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The tea leaves for trying to predict the course of the economy are numerous and scattered but there is one trend starting to emerge that will surely lead to a recession.

Economists and market watchers have been looking for signs that the slowing economy might be tipping over to a recession citing everything from the lack of inflation, minimal wage growth, a near stop in capital expenditures to purchasing managers index which recently dipped below the 50 level which indicates a contraction in the economy; the first such since January 2016.

 

 

The recent inversion of the yield curve, along with $17 trillion in negative debt, has caused the most hand wringing and loudest calls for a recession.

The one area that remains strong is consumer spending, which accounts for over 70% of the service based U.S. economy.  Recent data from the Conference Board showed the consumer confidence index climbed to 138.4 in September, it’s highest level since September 2000.

 

The number one factor in providing and boosting consumer confidence is job security.  This comes in the form of both the ability to maintain a current job or proactively being able to switch and find new, presumably better, employment opportunities.

On that front things seem to be hunky dory as not is the unemployment rate of 3.7% near a 30 year low but the JOLTS index hit a 10 year high last June.  In fact one of employers’ biggest complaints is that they can’t find enough skilled workers to fill job openings.

But behind the kumbaya headlines there is developing a more worrisome trend; announcements of layoffs are appearing more frequently and impacting larger number of people and industries.

For example Uber (UBER)  had two consecutive job cuts in the past week totally over 800 people or nearly 8% of its work force, as it seeks a path to profitability.

These were high paying jobs, such as engineers and marketers.  And with UBER’s stock still underwater from its IPO, that adds up to…

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About author

Steve Smith
Steve Smith

Steve Smith have been involved in all facets of the investment industry in a variety of roles ranging from speculator, educator, manager and advisor. This has taken him from the trading floors of Chicago to hedge funds on Wall Street to the world online. From 1987 to 1996, he served as a market maker at the Chicago Board of Options Exchange (CBOE) and Chicago Board of Trade (CBOT). From 1997 to 2007, he was a Senior Columnist and Managing Editor for TheStreet.com, handling their Option Alert and Short Report newsletters. The Option Alert was awarded the MIN “best business newsletter” in 2006. From 2009 to 2013, Smith was a Senior Columnist and Managing Editor for Minyanville’s OptionSmith newsletter, as well as a Risk Manager Consultant for New Vernon Capital LLC. Smith acted as an advisor to build models and option strategies to reduce portfolio exposure and enhance returns for the four main funds. Since 2015, he has worked for Adam Mesh Trading Group. There, he has managed Options360 and Earning 360, been co-leader of Option Academy, and contributed to The Option Specialist website.

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