The Rapid Jobs Wind-down is Cracking the Market's Overhang for a Big Avalanche
It should be no surprise that the non-government jobs reports we now rely on—so that we’re seeing those reports show up at the top of the headlines rather than the government’s “gold standard” reports—are consistently showing worse happenings in the labor market than the government reported. I always said the government numbers were overstated; and, yet, the government gal in charge got fired for not being glowing enough. It seems every report that comes out from the real world now is deeper in recession than the one before. Today delivered the worst jobs report in more than TWENTY years.
We’ve gone from borderline recession reports by the government of a positive 150,000 net new jobs for one month to smaller more recessionary numbers and now all the way deep into negative numbers—150,000 jobs lost on net in the last month. For this particular report by Challenger, Gray & Christmas that amounts to a 183% increase in the number of also negative (LOST) jobs they reported for the month before, which made this the worst October since 2003. At the same time the number of announced layoffs for the year makes 2025 the worst year since 2009. Both comparisons align present results with the bottom or tail-end of our two worst stock-market crashes in recent decades.
(Note: I think the report excludes in those comparisons of annual announced layoffs the anomaly of forced terminations during Covid because it later says companies this year have announced 1.1 million cuts, a 65% increase from a year ago and the highest level since the Covid pandemic year of 2020. Either way, bad.)
Retailers are also reporting they plan the lowest hiring for upcoming holiday shopping season in, at least, fifteen years. That takes us back to the Great Recession.
…retailers have largely tried to limit their spending as they manage higher costs from tariffs….
It’s no surprise, then, that stocks took the news abysmally, sending the Dow down 400 points (0.84%) and the tech-heavy Nasdaq down 1.9%. During a period that is turning out to be a bad time for highly overpriced tech stocks. AI stocks, again, performed the worst—something we’ve seen several times now.
The Nasdaq 100 was down more than 2% since last Friday’s close and is on pace for its worst week since early April. The biggest downside impact came from Nvidia, Microsoft, Palantir Technologies, Broadcom and Advanced Micro Devices.
AI stocks have moved unevenly since the start of November, and that continued in Thursday’s session.
That kind of quivering at the top is what we saw at the start of the dot-com bust when investors started to insist that high tech companies show them the money—demonstrate that they can actually make real profits and are not just endlessly spending on faraway dreams. It squares with what I’ve said in the last few days about the tech bust that now looks imminent.
If not immediate, the right pressures are certainly now forming for a historic-scale bust like we saw in 2000. It is, as I wrote earlier, the reason for the new temerity at the top that matters: Investors are now expecting to see profits from the companies they’ve been pouring a vast fortune into. When they don’t see those profits, they are now becoming unforgiving; and THAT, I’ve predicted based on what we saw in 2000 will be the tipping point when the mania gives way and the whole overhang starts to avalanche.
These suddenly negative job numbers (versus the earlier ones that were just less positive than we need to keep up with population growth) are stomping on the cornice of towering stocks, breaking the overhang loose.
“So much of this stuff from a valuation standpoint was so lofty and priced for perfection that we’re seeing in the market a bit of a dichotomy between companies that are beating and raising versus those that maybe are beating on the top line but providing tepid guidance on the bottom line or from an operating profit standpoint,” said Mike Mussio, president at FBB Capital Partners….
Plus …
“We’re starting to get dribs and drabs of the economic data ... that’s not government related, and it’s not super rosy,” Mussio said, adding that “all that stuff is just setting up for some market weakness….”
All three major U.S. indexes are firmly in negative territory week to date. As of Thursday’s close, the 30-stock Dow is on pace for a 1.4% loss, while the S&P 500 has shed 1.8%. The tech-heavy Nasdaq is down by 2.8% this week.