Two
275,000 jobs. Now we see that it's up to
270,000 jobs. So there was a downward revision for the
month of February,
as we expected all these revisions.
Joining us right now for the rest of the hour
is SNBC Nico,
chief economist and former chief economist for the White House
National Economic Council Joe Lavonia.
Back with US Job Creators Network CEO and the Real
Race Revolutionaries.
Author Alfredo Ortiz is with us.
Crossmark Chief Executive Officer and Chief Investment Officer Bob Dahl
is here.
Heritage Foundation economist and former Trump economic advisor Steve Moore
is with us and the Lonski Group founder and president
John Lonski,
along with Dan Niles. Great,
great panel this morning on the jobs numbers.
Joe Lavonia kicking things off here with you.
Your reaction to this jobs report?
Very good. Maria. The the the household employment was actually
up almost
500,000. The unemployment rate fell.
The work week was stable.
It looks really good right now.
Certainly better than than consensus expectations,
better than a lot of other data might suggest the
PM is.
For example, purchasing manager surveys suggest there should be weakening
employment.
So at least for March,
things look good. Even if we look at the private
sector,
your job growth over 200,000.
If I take out healthcare,
still looking at private X healthcare of around 1:50,
it's a it's a good number,
no question. Well, it's a good number,
but is it too good for rate cuts?
Bob Dahl, I mean, yesterday we heard from Neel Kashkari
saying I'm penciling in two cuts,
but there's a chance there's no cut at all.
If the economy is on fire like this and we
got
303,000 jobs in the month of March,
why cut interest rates?
Because the economy is stronger than expected.
Inflation recently is not coming down.
You're absolutely right. The probability of cuts continues to be
pushed out in time and reduced in amount.
And that's why you saw a market sell off yesterday.
Steve Moore, your reaction.
Well, I hate this idea that good news for the
economy is bad news for the stock market.
I never understood the logic for that.
That's this old fashioned Phillips curve idea that growth causes
inflation.
Growth doesn't cause inflation. But but I am worried about
inflation for other reasons.
I mean if you look at what's happened to the
commodity prices just since the beginning of the year,
they're up about 13%. So somebody has got to explain
to me why in the world would the Fed be
cutting rates right now when we do have an inflation
problem?
We have not slayed the inflation dragon.
It's still out there. I'm looking at about 5%
inflation for the next few months based on these forward-looking
indicators,
the gold price, commodity prices.
So no, the Fed should absolutely not be
cutting rates. Now I'm not saying they should be raising
them,
but but on on the economy,
look, I'm with Joe, I think this is a solid
report.
I haven't seen the particulars,
but one other quick point because we've talked about this
month after month over the last year,
the downward revisions on the initial
jobs report, Maria down a million jobs.
So we'll see if this,
this number holds up in the months to come.
Guys, rates are soaring, OK.
The 10 year yield right now is up 8 basis
points,
putting the yield at a level of right below
4.4%, OK, we're at
4.39% right now on the 10 year.
John Lonsky, your reaction, that's right.
I think the treasury bond market is telling us there's
not much room for this economy to grow without putting
more upward pressure on prices.
It makes no sense that the Fed would be cutting
rates and what is very much a full employment economy
where inflation is once again on the rise.
Yeah. And that is what we're seeing this morning.
Alfredo Ortiz assess the jobs market for us right here.
How do you see it?
Yeah, well, you know the
the the Wall Street and Main Street
picture is very, very different
than we have on Main Street.
And when I go out and talk to,
you know, restaurant restaurant owners and just patrons and just
regular people,
regular folks on Main Street,
the inflation issue is still a major,
major factor. I think the Wall Street Journal just yesterday
showed that groceries,
for example, since post pandemic are up almost 40%
and with you have credit card rates where they are
right now.
I mean I don't think there's going to be
a rate cut. I've been saying that all along and
now with inflation the way
it is now, I don't see that rate cut coming.
Which means that our small business owners,
the regular consumer where credit card rate or assuming where
credit card debt is at the highest levels,
they're the ones that are suffering.
Those 1090 nines out there,
for example, that aren't picked up in the
establishment survey. I mean those are the folks that are
really hurting your everyday person,
your everyday small business owner.
Those are the folks that are really hurting Wall Street
and Main Street.
It's actually, excuse me, Wall Street and K St.
It's actually pretty rosy. Yeah.
All right. Well, I want to come back to you
in a minute,
Alfredo, and get your take on where specifically the jobs
are as we watch crude oil at
8666 right now. Brent crude at
$90.89 a barrel. Daniels, jump back in here as an
investor,
which you are, and you've got to put money to
work.
You see a jobs report out like today.
What's your next move?
Well, my next move is to really go the
onus for the stock market going up is continuing to
shift after this strong a jobs number.
You can't count on the Fed bailing you out with
rate cuts.
So you absolutely have to have earnings growth for these
companies.
And so that becomes an even bigger focus in a
week when we start to have the first set of
earnings coming out.
And if you're missing numbers,
you saw the Tesla delivery numbers and how the stock
reacted to that when they missed,
even though the stock was already down 20 some odd
percent going into it,
it's now down over 30%.
You've got to get your earnings working because just telling
a great story about how life is going to be
5 years from now and how you're going to do
great, that's not going to cut it anymore.
You're going to have to show the numbers and make
them good.
So Dan, where, where is the growth?
I mean, we've been talking a lot about the tech
sector,
but you've also been tapping into the rally in commodities.
Have you not, I mean what do you want to
do in terms of commodities when you see copper,
gold, oil, etcetera, etcetera moving up?
Yeah, so we've got investments in the industrial space,
we've got investments in
uranium for example as well on surgeon nuclear energy which
we think is important.
AI, one of the things it does power hungry and
so we think that's going to help drive it.
We're in some of the Fintech stocks as well.
So to your point, I think you have to broaden
beyond just you know the headline names that everybody's been
focused on for the last year and change
off of AI. And that's what we're we're really trying
to do is move outside of that and look in
some of the smaller cap areas as well you know
RFID et cetera. And so I think that's the big
theme for the rest of this year because multiples aren't
going to continue to expand when you've got inflation this
high and the economy this strong and the Fed likely
to move from three rate cuts to maybe one or
two or maybe none depending on how things go exactly.
Joe Lavonia, I'm coming to you next.
I want to get your analysis on this report.
But first let's get to Lauren Simonetti.
She's got the breakdown of this report right now.
Lauren, what can you tell us?
The bulk of the jobs were created in healthcare
72,000. In government 71,000. Construction at a
39,000 Maria and leisure and hospitality
49,000 with a return to pre
COVID-19 levels. Headline
#303,000 Jobs added as the number of unemployment unemployed people
falls from 6 1/2 to
6.4 million.
Average hourly earnings, as expected up
.3% on the month. It's
$34.69, an hour of 4.1%
on the year as expected.
Also Fed's interpretation of all this If you look at
the the the Fed Watch tool,
the CME Fed Watch tool,
there's a
54.7% chance of a June Fed rate cut.
That's down four points from right before this number came
out.
Maria OK, that's great analysis.
I like the fact that we're seeing job creation in
healthcare.
That's important and that's been a consistent situation now for
a while.
What, what what strikes you most,
Joe Lavonia, what do you want to say about the
nuts and bolts of this report?
The Healthcare is important because that's tied into government spending
and government jobs have been very,
very robust, Maria. So question is why is the economy
outperformed expectations and one of the reasons is
we have had significant government spending.
So for example if you look at
the the spending data from the treasury pre COVID we're
running at about a 5 to 6%
annual rate, which is still very fast.
Since January of 2021, I've calculated we've had effectively about
3 1/4 trillion of excess spending.
In other words, spending in and above what we would
have spent had we just maintained that pre COVID trend
and that to me is probably juicing the economy.
We're seeing significant rises in debt.
You're seeing CBO zone forecast not only not showing a
recession for 10 years which would be highly extraordinary,
but also deficit to GDPS that are ratios that are
still in the mid to high 5 S To me
a lot of the success of government spending is probably
juicing the economy. At some point we're going to pay
for it.
But right now I'd say some of it is artificial.
That's interesting. Steve Moore, no,
as you always spot on here,
you know, if we look over the last year,
the the two sectors that have really dominated employment growth,
how many times have we been talking about this,
Maria, it's healthcare and government spending.
Why in the world is the governments,
the governments around the country hiring more workers when we're
running a $2 trillion deficit?
Yeah, I mean it's the,
the craziest thing. We want to see government employment falling
very substantially so we can at least get somewhere near
balanced budget.
But when you've got government as the fastest growing employer,
I see that as a very negative thing.
The other thing I'd quickly mention is we're still
at 60, what is it,
62.7% I think was the
was the labor force participation rate.
We need to get that up to
65 to 66%. We've got about 3 or 4 million
people still missing from the labor force.
We need to get people back in the workforce.
I think a lot of it is just government is
paying people still not to work and that's a big
problem for employers.
That's incredible. Alfredo, where are the jobs right now?
What can you tell us?
Yeah, Maria, you know, our big concern is that difference
between that household survey and the establishment survey.
Because if you remember on the household survey that actually
is picking up,
you know, where you have part time workers,
the establishment survey actually double counts those jobs.
And so when when you see those job growth in
the establishment survey,
those are a lot of folks that are actually doing
part time jobs out above and beyond their full time
jobs.
And so I I'm concerned that these,
again, this is not reflective of the real economy of
Main Street America.
I mean you know people are actually hurting out there.
K St. and Wall Street,
they're doing great. But again,
a lot of folks I think are going into these
part time jobs because they can't make ends meet.
And so this is a big concern overall.
I hear this from folks all the time when I
walk down Main Street and talk to folks like I
said patrons or restaurant owners,
these guys are still hurting.
And so that is definitely concerned.
And just like what Steve said as well,
almost 50% of the jobs so far the growth rate
has been basically in government or quasi government jobs,
IE healthcare. So, Dan Niles,
you're still open to the idea that things could slow
materially.
I go back to how I started the interview at
the beginning of the hour,
which is watch energy. If oil stays up here at
$90.00 a barrel,
you're going to have a problem because
that's just too high and it's going to seep back
into inflation.
It's going to push that higher and at the same
time it's going to SAP consumer spending.
That combined with the fact that now with the moves
that we're seeing right now you've got 10 year treasury
yields 50 basis points higher than the
3.9% that they started the year at.
So in a consumer LED economy,
services based, that's what you have to watch.
And so following this report,
my thought is even more,
hey, be more negative on the consumer facing companies,
be more positive on more the enterprise facing companies and
be very cognizant of who has
potentially negative impacts from higher input costs from things like
oil.
Yeah, it's a great point.
That's why we're focused on oil as well.
But Bob Dahl, it's been a rough week for stocks.
Look, we begin the second quarter lower
after this week that about 3%.
As an investor, as somebody who's gotta
come up with decisions in terms of people's money,
what do you want to do?
We're either only two way stocks go up,
the PE goes up or the E earnings go up.
We've just talked about PE,
it's already 21 times. That's pretty high and now you've
got the feds probability of cutting rates dwindling.
We have rates moving up out the curve.
Hard to see more PE earnings consensus already incorporates
11% this year, 13% next year.
I just noticed first quarter earnings have been revised down
since the first of the year from up over 6%
to 3 1/2. So I don't have earnings either.
I'm cautious. So you're cautious going into the first quarter
earnings reporting season that's going to begin in about a
week.
Are there areas you want to avoid going into this
earnings season?
Then
I want to own companies that have high earnings predictability,
high earnings persistence and good free cash flow profiles.
So companies that are dependent on multiple increases or economic
growth.
I want to be careful.
We own a lot of energy stocks.
Accepting what we just said,
no, that's a great point because John Lonski,
it has been energy that really has been where the
action is energy and tech.
Yeah, right. And of course the only problem is that
energy is benefiting it on the in the equity market
because of higher oil prices and as oil prices climb
higher so will the rate of inflation.
Just want to add one thing,
Joe and Steve make a very good point in that
the government has been the primary driver of economic growth
in
2023 and thus far in
2024. Let's not forget last year a real GDP grew
by by 2 1/2%,
but that was well behind the better than 4%
growth of government spending. That doesn't include this healthcare spending.
And what we end up with is a strange situation.
On the one hand, we have the Federal Reserve fighting
inflation with higher interest rates.
On the other hand, we have the federal government promoting
inflation with fiscal stimulus.
This is a situation that cannot persist indefinitely.
I think that eventually it breaks via
a much greater than anticipated jump by Treasury bond yields.
Well, treasury bond yields are up this morning,
Dan Niles, we're talking about the yields up to
close to what, 2.43 point,
4%. You got the 10 year at 7,
up 7 1/2 basis points right now sitting at
4.38%, Dan Niles.
Yeah. I mean, I guess you got to remember for
me,
I don't really care if
what happens with stocks going forward
because the strategies that I have,
if I get the right stocks that are going down,
then that works out just fine.
So
that's why we have a list of names that are
both
exposed positively to what's going on as well as negatively.
And that's typically driven by competition.
And so that's what we're really focused on here.
And so to everybody's points,
there's nothing about this jobs report that makes you feel
better about inflation in the future etcetera,
but it does make you feel pretty good about the
economy.
And so you need to be even more careful about
where you're allocating capital.
And you know, I'm going to be more aggressive on
the stuff that I think is going to miss earnings
coming up in a couple of weeks.
And so for me, I love this jobs report because
it means earnings are going to matter even more than
they did just,
you know, two hours ago.
And so that's terrific If you're a stock picker.
If you're somebody who's just investing based on a headline,
yeah, this jobs report isn't good for you because you're
going to have a lot more volatility in the market
and a lot more dispersion in stock prices.
It's a yeah, please go ahead.
You know, we've been talking a lot about the stock
market and what are the threats to the stock market,
what's going to happen with interest rates.
But I want to, I want to remind people that
by far,
by far the biggest risk to the stock stock market
is what Joe Biden is proposing on taxes.
If you did anything at all remotely near what he
wants to do,
which is double the capital gains tax increase,
the dividend tax increase, the
US corporate tax rate from 21 to
28%, you're talking about taxes on investment that would go
as high as 50%.
And and so what's interesting is you know you just
came out with that Fox poll a couple days ago
that shows that Trump is in the lead I think
in four of the five key battleground states.
I just wonder how much,
Six out of seven, six out of seven.
I just wonder if maybe the market is pricing in
a little bit,
you know and employers to the idea that maybe we're
going to get a new president in November.
We'll see. Does that work into your looking at markets,
the idea that we could see policy changes next year.
What do you think, Bob Doll?
Yeah, has to. The policy differentials between these two guys
is
pretty significant. I agree with all Steve has said.
One of my concerns, however,
is the massive tariffs this Trump is thinking about putting
on.
That's not great for our economy.
But the rest of the tax issues,
it's clear cut differential. Yeah,
he certainly wants to keep China in check.
By the way, Speaking of the administration,
I just want to point out because I have this
breaking news here and I've got the lawsuit in front
of me.
Tony Bobolinsky is suing Dan Goldman.
Congressman Goldman took tried to take him to task when
Tony Bobolinsky testified.
John Lotzky I want to get your thoughts on this
because Tony Bobolinsky says Dan Goldman has repeatedly lied about
Bobolinsky saying that Bobolinsky has used a Trump campaign paid
lawyer to lie since October 2020 spreading Russian disinformation and
is a Trump campaign plant.
Bobolinsky comes back and files a suit in District Court
for the District of Columbia,
suing Congressman Dan Goldman. I have the lawsuit in front
of me.
Your reaction, John Lonski? Well,
I think, you know, this is helpful maybe for the
Trump campaign.
I mean, Bob Olinsky is,
you know, shedding light on the fact
that the opposition will do anything,
anything in its power to go into to
make Trump look bad, to make Biden look good in
this case here
with the money the Biden's had been receiving.
And why go ahead and just sit back and take
it?
Well, why not fight back?
So I would say that it's a a good,
strong move on the part of Mr.
Bobolinsky. Steve Moore, any thoughts here?
Not on that one. You'll have to ask some of
the others.
I've been following that story.
All right. We are talking about the jobs numbers that
have just been released 20 minutes ago.
It was hotter than expected,
303,000 jobs added to the economy,
a different scenario than what we see in the household
sector.
Nonetheless, initially after these moves,
we had a bit of a market sell off and
now we're back up.
The Dow Industrials up 110 points and the NASDAQ and
the
S&P 500 up in the double digits.
Alfredo Ortiz, I want to get you back in here
because you said there's a real mixed showing when you
look at Main Street versus Wall Street.
You're saying that money is tight on Main Street.
It it absolutely is, Maria.
And I don't mean to sound like a broken record,
but look, when you have a
an economy that's still 2/3 consumer driven
and you have folks that are taking out,
you know, you know, two jobs,
but you know, one full time,
a part time job, they're driving an Uber just to
make ends meet.
They have basically record record credit card debt.
They have no savings. I mean,
they're tapping into their 401 KS.
The situation from the consumer side on Main Street
is very different and this is a big concern.
I know we're talking a lot about,
you know, the earnings season and stuff like that.
I'm sure it's going to have a great earnings season
because a lot of these companies were able to take
price increases on the consumer,
but these consumers can't take price increases anymore.
Our restaurant owners, for example,
are small business owners. They can't take prices up any
higher to keep up with inflation because they're losing their
consumers,
they're losing their customers. And so it is a very
different picture.
I know people are feeling really good about how the
markets doing and we're almost at record territory.
But look at $88, let's say a barrel on oil,
inflation is going to definitely rear its ugly head and
it's going to hurt consumers yet again.
And our small business centers,
Joe Lavonia, what is it going to take to get
inflation down?
Because I thought it was brilliant what the Journal did
today in terms of what $100 gets you
today versus a couple of years ago.
And we're seeing this inflation persist for food,
for fuel, energy, oil, close to
$86 a barrel right now.
What will it take to get these numbers down?
The I don't think they're going to come down very
much,
Maria. And this sort of gets to why economists and
households,
regular people look at things differently.
People rightly look at the price level.
What is the cost for To buy groceries and life's
necessities?
They are up significantly, roughly 20%
in the last three years and the Fed however doesn't
look at the cumulative price level increase but rather the
growth rate.
I'm optimistic that inflation, despite what's happening now,
the growth rate of inflation will come down because I
do see weakness coming in goods prices as we're importing
deflation from China and also rents.
We had record amount of a home supply last year
in the multifamily sector that's going to lower rent.
So the growth rate in inflation I believe will come
down over the course of this year toward 2%
toward the feds 2% target.
But that does not mean that all is great in
US household consumer land because prices are still,
as I said, significantly above where they are.
So there's this dichotomy between what economists or the Fed
looks at and what real people look at.
One of the issues, Steve Moore,
is the fact that while the Federal Reserve is trying
to get
inflation down, it's facing a tsunami of constant spending.
I mean, look, the president is right now as we
speak,
doubling down on forgiving more student loan debt.
Yeah, I mean, just look at his budget
forecast for the next 10 years.
I mean, he has basically trillion dollar increases in spending
per year
on and on. And that's about a,
as I calculated about an 8 to $10 trillion
increase in the debt. And look,
that can't continue. It's sort of like party on,
Wayne. You know like right now we're in a situation
where we're borrowing,
borrowing, borrowing, but at some point that bubble is going
to burst.
And I always get asked when's that going to happen.
I don't know if it's going to happen three weeks
from now or three months from now or three years
from now,
but it but there will be a price to pay.
One other quick thing, when you were putting up the
sectors of where the employment growth is,
I saw no increase in manufacturing.
Construction is low business, employment was not.
We didn't, we didn't have,
look, this is a good report,
but we didn't have the growth in the places we'd
most like to see them in.
That is people making things in America.
Yeah, it's a great point and Dan that is why
you are staying flexible in terms of in terms of
allocating capital right now.
Go back to the beginning of our conversation,
Dan Niles, tell us the macro story and how you
look at it in terms of allocating capital today.
I think unfortunately you're in this day by day knife
fight with the market.
And so I think you know every piece of data
you get.
Now, especially with a 10%
gain just through Q1, you've got to watch everything that
comes in.
I start with oil, but the one thing don't forget
when you're investing in stocks is what do you know
for serve.
What I know for certain is this is going to
be the most contentious presidential election that we've ever seen
in our lifetimes.
And an exorbitant amount of money is going to be
spent by both sides.
And so for me, I look at the advertising space
and go,
that's where the money is going to get spent.
So
for a name like Meta where they're going to benefit
disproportionately from that as both candidates take to social media
to try to get their message across,
that's where I want to stay invested.
So the things that I'm certain in,
I know the Olympics are coming regardless as well.
So and that's more spending.
And so that's kind of where I want to stay
focused and then stay away from the stuff that needs
to have much lower oil prices
to to work because I think that's going to be
hard to find with an economy that's this strong.
And so that's kind of how I I split my
universe and say this is where I want to be
extremely negative
and this is where I know this is certainly going
to happen.
I want to be very positive and we talked about
a stock last October
in pinch and I know you're looking increasingly outside of
the mega cap tech.
I'm going to ask you about that when we speak
tonight on Marie Bar,
Turmoil's Wall Street about how you're looking outside of the
mega cap.
So I appreciate you joining me tonight on Marie Bar,
Turmoil's Wall Street. Dan, final word here on this story.
We got a market that is still up
on the heels of this hotter than expected numbers.
Guys, thank you so much.
Great conversation Joe Lavonia, Alfredo Ortiz,
Bob Doll, Steve Moore, John Lonski Daniels.
We appreciate your time. Have a fantastic weekend every.