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The Next Major Headwind For Stocks
The market was in ecstasy Friday.
The Dow climbed 700 points and hit its highest level in weeks.
It’s now within 10% of reaching all-time highs.
The cause of the surge was the monthly jobs report.
It’s not because the report was good, but because it was not good.
The headline number came in at 220,000, the lowest number in more than two years.
But what really got the market going was the lack of wage growth.
Annualized wage growth clocked in at 4.6%, below expectations of 5%.
This is the weakness the Fed is watching as the sign of a cooling labor market.
That’s why the less-than-good data from the report sent stocks climbing.
Because the cooling job market means the Fed will lighten up.
Here’s the problem though.
Lack of wage growth is going to be a huge drag on the overall economy because it’s coming at a time consumers can least afford it.
Let’s go back to the two most important charts in finance today – the personal savings and consumer debt levels.
The first chart below shows personal savings continues to fall:
The second chart shows consumer debt levels continue to rise:
There aren’t many ways this all turns out good.
Consumers will cut back spending, the jobs market will cool, the economy will contract, corporate earnings will drop, and stock prices could follow them all down again.
Today’s jobs data combined with this consumer finance data is a recipe for a painful recession.