New Jobs Data Reveals an Economic Worst Case Scenario

Hello, fellow rebel capitals, hope you're well. The big news today, ADP numbers are out and they disappointed on the downside, lower than expectations, which has to lead you to believe that Friday we could get a negative non-farm payroll report. And like we said yesterday, when you combine that with what oil is doing and more importantly, diesel, gasoline, the crack spreads, this is really a worst case scenario for the economy outside of a GFC type event or some sort of black swan. So let's go into the ADP numbers, get into the details, find out where the jobs were created, where they were not created, where they were destroyed, and then go over really the impact and what's going on beneath the surface with energy prices. Because not only is that important to the economy, but obviously it's important to pretty much every single one of you watching this video, because it translates into what you're going to pay at the pump. All right, so Josh is swiping and so I'm gonna have to do my own screen share. Let's do this one first. And we're gonna go over to CNBC, pretty straightforward, private payrolls rose by 38%. So the expectation was for 47, last month we got 46. So let's think about that. Last month we had 46,000, that was the ADP print. Well, I shouldn't say, no, I guess that comes out weekly. Does that come out weekly? No, I'm thinking initial claims. So ADP, I'm 90% sure. I also wanna ask AI, that that comes out monthly. Yeah, that has to come out monthly. Okay, and the last one, bottom line is 46,000. And with that 46,000, with an on-farm payroll, we had a negative 23,000. So that would lead you to believe that there's an even higher probability than what we talked about yesterday, that we get a negative non-farm payroll. Now, if you didn't watch the video yesterday, we talked about the jolts numbers disappointing two months in a row. And often that leads to a worse than expected non-farm payroll. And currently the non-farm payroll is right around 53. I think, yes, expectations right here, 53,000. So now let's get back to CNBC. Okay, I don't know if there's any value in the key talking points. I think we've gone over what we need to go over. The report comes ahead of the BLS non-farm payroll count due out, yes, we know that. Okay, so let's go over to the actual numbers here and start getting into some details. So this is the ADP's website for August. Yeah, so it is gonna be monthly. 38,000, that's what we got. Remember expectation on 46,000, 47,000, something like that. Here you can see something very important. This is more on a macro level, not necessarily about or specific to this week. Look at the trend. Even during the 2010s, which as you guys know, what was not a booming job market by any stretch of the imagination. But look at the trend. We start to roll over right here in 2019. By the way, we start to roll over prior to the Cervasius sickness. This is not just a Cervasius sickness phenomenon. So then you get just everyone locked in a cage by big daddy government and you come out the other side and we get, so then we're on a higher trajectory but that plateaus and then when we quote unquote normalize, you see that we are on an upward slope. I'm gonna have to bend down to see this. We're on an upward slope but this upward slope is at a much, much lower trajectory than what you had even in the 2010s, which was a, I would call it stuck in the mud type of labor market. All right, let's keep going. So here is when they break it down by size of the business. One to 19 employees, we're up 20,000. 20 to 49, down 17,000. Midsize, up 2,000. We get a net wash here with the 250 to 499 and then large businesses hired the most, which is really no surprise. So breaking things down by the industry, we got manufacturing jobs down 17,000. Thanks, thank goodness for those tariffs, right? Obviously I'm being sarcastic there. I don't wanna get into my Trump or tariff bashing. We'll save that for a separate video. Okay, natural resources, mining down 5,000, which is really interesting when you consider the precious metals, copper, et cetera, really not at all time highs. Look, copper might be close, but definitely way up over the last couple years. Trade, transportation, that's always a big one too because if you're transporting less, it tells you a lot about the underlying economy. And usually when transportation jobs go down, that's one of these recession indicators. Although, that said, construction would be the same type of thing. So if you look at a long-term chart of construction jobs, when you start to get a dip, usually that's a slight leading indicator that you're going into an economic contraction, if not an outright recession as defined by the NBER. So it's a little bit of a mixed message, I guess, when you look at the construction jobs and the transportation. Professional and business services, you gotta wonder if that's all about AI. Education and health, that seems to be up every single month. Leisure hospitality has actually been down, if I remember right, the last few months. So it's good to see an uptick there. But overall, again, worse than expected. I don't know if there's a lot of signal in the industry by industry. If we had a big negative number on construction and a big negative number on transportation, I think that would be the signal we're really looking for to sift through some of the other data that can, at the end of the day, be kind of noise. Okay, technical notes, we don't need to know what their formulas are. All right, so now let's go over to Zero Hedge, because we discussed this briefly yesterday, and I think it's really, really, really important when we're in this week of, let's say, heavy-duty jobs data, and at the same time, we're seeing oil really go up. I think today, before we get to this Zero Hedge article, let's just do a quick sneak peek of oil. We're still over 90, and that's on WTI. We're still over 90 bucks a barrel. So this, in and of itself, isn't a huge deal, because at the end of the day, people don't consume oil. They consumed the refined products from oil. That's what's most important. So then it's not just about the price of oil, but it's also about the crack spread. So let's go into that in a little bit more detail, because that's what's gonna tell us how negative an impact we will have on the overall economy, in addition to a labor market that is, at the very best, slowing down. And if we get a big negative number on Friday, even the bulls are gonna have to throw in the towel and say, okay, we admit the labor market is sucking hind tit here, as my father used to say. All right, so U.S. diesel at the pump nears April war high, and that was when gas was 120, or excuse me, oil was 120. So you see, it's not just about oil prices. You can have lower oil prices, but if those crack spreads blow out, then what's really important, what you're filling up the tank with, gas or diesel, those prices, even though oil is lower, can be higher or at the same level, which is obviously extremely restrictive to the overall economy, just like a tax. And for those of you who didn't watch the video yesterday, just a very simplistic version of a crack spread, just get your head around it, is the delta between a barrel of oil and then that same barrel, so you've gotta, in terms of volume and amount, you've gotta compare apples to apples. So that same barrel filled with diesel, what's the price difference? So if the price difference is 100 bucks, let's assume that you're paying 90 bucks a barrel for the oil, and that same barrel filled with diesel, the refined product, is gonna be 190, and that crack spread is 100 bucks. Okay, let's keep going here. So the diesel price shock may be approaching, why wouldn't it have already hit? It's not like diesel has just been sky high over the last week. I mean, it's been sky high for a long time. I mean, look at this. A month ago, diesel was at $5.36, because of what we just talked about. A week ago, it was at $5.62, and then as of today, it's crept up to $5.68. So yes, I mean, we're at a high going back to April, but it's not like we were low, for heaven's sakes. When you look at a year ago, we're at $3.69. So think about that in terms of how many goods are transported. So next time you go into Walmart, Target, Home Depot, just remember that every single good in there, everything, everything has diesel incorporated into the cost. Why? Because it took diesel to transport all those goods from Walmart, Target, Home Depot, to the Walmart, Target, and Home Depot. Because it's not like they were produced just in the back. It's not like you go to Walmart, and every single little toy, it's not made in the back by elves. Those elves live in China. So it has to be transported there. So like we said, diesel's massively gonna impact those transport costs. And it's not like from a year ago, diesel is only up like 10%. I mean, that is a massive percentage increase. We're talking about $2. So I mean, just back of the napkin math here, I mean, you're looking at, I don't know what, an 80% or so increase? I mean, that is substantial, to say the least. Here is the average gasoline price, diesel. Okay, we got that. So that's when they're talking about, it's gone back to the April highs there. Again, remember, that was when oil was 120 bucks a barrel. So that tells you that there's a lot of strain on the refining capacity. In addition to that, the Straits of Hormuz, it's not only allowing less oil to be transported, it's allowing less stuff, period. So that would mean less diesel, less refined products, and less helium, and less everything. Not just oil comes out of the Straits of Hormuz. So this is another thing you've got to think about. We have gone from 80, actually, let's just look at a chart real quick. Because of the escalation over the last few days, the last few weeks, we've gone from basically 80 straight up to 90. So you've got an increase of, I don't know, over, what is it, 10, 15% increase? So unless the crack spreads come down, which I don't think they will, you should expect a 10 or 15% increase. It obviously is a lag, but you should expect a 10 to 15% increase above and beyond what we see right now in the price of diesel. So if we go back to the Zero Hedge article, and where are we here? Yeah, I would not be surprised. Assuming that everything stays the same, and there's no further escalation, but there's no de-escalation, so oil is kind of hovering around 90, 95. In the next few weeks, I would expect, near 550, I would expect it to be north of six bucks. Talking about diesel. I mean, at some point, this breaks the economy, obviously. And at what point it is depends on the labor market. So the labor market, let's just say, we had another chart right here. Let's say it's just this strong, right? We just draw a line here. That's how strong the labor market is right now. And let's say the labor market being this strong, in order to break, requires $7 diesel. Okay, but if the labor market deteriorates to where now it's only this strong, that does not require $7 diesel. Obviously, these are hypothetical numbers, so we understand the concept. That could break at $6 diesel. You see, that's why the interplay between these two, so, so, so, so, so important. The interplay between energy costs and the labor market. Let's keep going. Okay, now it's just talking about geopolitics. Trump downplayed hopes of a new deal with Iran. I mean, it just, who knows? It just fluctuates day to day. Oh, wow. So this is what I was talking about earlier. Global exports of refined products declined with the Persian Gulf and Russia accounting for about 75% of this decline. Well, obviously, that makes sense. So this goes back to what we were saying, that when you think about the Straits of Hormuz, you can't just think about oil. You've got to think about the refined products from that. Looks like this black line is total. And so, yeah, I mean, no surprise here, right? We go from a zero point just before Trump invades Iran, and then it just tanks. But look at this. More recently, kind of went up there, probably with that absurd MOU, and then it just deteriorates further. And now, we're at a low point. If I'm reading this chart right, yeah. We're at a low point as far as refined products. So that would lead me to believe that the crack spreads are going to go even higher. So remember when I was saying that diesel goes north of six bucks? That's if oil stays the same and the crack spreads stay the same. If the crack spreads increase, I mean, you're looking at 650 here in the next few weeks, maybe the next month for the price of diesel. And what does that do to the price of gas that you just put in your car? I mean, I don't know where we're at right now. Did we have a chart of that or was it just diesel? Let me see. Oh yeah, good, good, good. So right now, it looks like the average across the United States for just regular cheap stuff is $4.12. So you've got to assume that if the price of oil stays the same, if crack spreads continue to increase and meaning oil staying the same right around 90, 95, I don't see why that wouldn't be five bucks here in the next month or maybe less. I mean, at a certain point, politically, you've got to ask what the hell this does for midterms. That's the number one thing. It's just because it's every single person sees it every single day. It's just the price of gas. I don't think there's anything that impacts things from a political standpoint more than the price of gas. If there is, I can't think of it right off the top of my head. Yeah, so this is more of the same here. So let's see what's happening with interest rates. It's almost like a perfect storm. You have this deterioration in the labor market. You've got interest rates trending higher. You've got diesel and gas prices sky high and likely going higher. At some point, you're gonna break something. And it seems like the labor market is already broken, but it's just kind of a slow motion train wreck. It's not just falling off a cliff like a Wile E. Coyote moment. And also, let's think about this in terms of rates, because if we do see gas prices going north of five bucks, if you see diesel going north of six, 650, you're gonna see interest rates higher unless the labor market just absolutely collapses. And if you're seeing interest rates higher, you're most likely gonna see the dollar higher. And that puts even more pressure on countries in Asia that are having severe dollar shortages right now. Let's zoom out here on the two-year to a five-day. This is what I'm talking about. I mean, this isn't debt and deficits or this nonsense. This is just oil. This is Straits of Hormuz. This is Middle East. This is oil right here. And then let's look at the 10-year treasury, so it's gonna impact mortgage rates. Let's look at a one-month chart. There you go. I mean, and again, this is not debt and deficits and, oh my gosh, the interest payments now exceed the defense spending or blah, blah, blah, blah, blah. No, this is just straight growth in inflation expectations as a result of the probabilities of the war just lasting longer and longer and longer and longer. That's being baked into the price here. It's being baked into the yields, which will be directly impacting, obviously, the 30-year mortgage, but not good for the real economy. I mean, the stock market, who knows, but for the real economy, not good. Oil prices up a little bit today, or excuse me, gold prices, and then you've got stocks kind of just doing what they always do, just grinding higher and higher and higher. So I think what we really have to do as prudent investors is just be hyper-focused on Friday and those non-farm payroll numbers. Obviously, I'll be doing a video on it, and based on that and then based on what the price of oil is doing, it's gonna give us a really good read as far as what we can likely expect from the U.S. economy in terms of the trend. Are we gonna continue to trend down or until it just completely breaks, or are we going to just do a complete 180 of a paradigm shift and start trending higher in terms of the economy? We would have to have a non-farm payroll number that would exceed 250,000 in order for me to say, hmm, maybe we've had that reversal. That's what it would require, over 250. Keep in mind, expectation's about 56, and there's a high probability that we get a negative. So you can't totally take 250 off the bingo card, but almost, almost. All right, guys, I'm super excited here. In a couple weeks, maybe about a week and a half now, doing a deep dive webinar. I'm calling it the AI Bubble Playbook. This is gonna be absolutely incredible, a webinar you're not gonna wanna miss. You can sign up for free. We'll put a link in the description below. And what we're doing is I'm going back in time to the dot-com bubble, and I'm looking at all these industries and compartmentalizing them, all these businesses, and compartmentalizing them into specific niches. And I'm saying, okay, which ones did the least bad during the bust? And then coming out of the recovery from 2003, let's say 2012, where did you wanna be? Which sectors went up the most? And so then we can apply that to the AI ecosystem, the AI bubble, and we can say, not with certainty, but with higher probabilities, these are the companies that will likely do the worst. These are the companies that will likely do the least bad during the inevitable bust that we have. And then more importantly, these are the companies that you really wanna go long after the bust. I'll also be revealing my entire portfolio to you guys. So if you've wondered what I have in terms of bonds, in terms of stocks, in terms of commodities, in terms of precious metals, you're gonna wanna attend this webinar. And then I'm gonna be going over, and when we're in this stage of the cycle, the last thing you wanna do is what everyone tells you. The last thing you wanna do is buy and hold, dollar cost average, buy the dip. And I'm gonna be going over the contrarian strategies that work the best when we're at this stage in the cycle. So again, webinar, you're not gonna wanna miss. You can register. You gotta do it now because it's limited on space. So if you wanna attend, make sure you click the link in the description right now and register. All right, guys, on that bombshell, enjoy the rest of your afternoon as always. Make sure you're standing up for freedom, liberty, free market, capitalism. We'll see you in the next video.