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Investing Specialists

Grim Numbers Now, Grimmer Numbers on the Way

Exogenous factors could produce shockingly bad statistics for another month or two.

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The week ended on a low note as the employment report showed job growth of a paltry 54,000 versus expectations a week ago of 180,000 new jobs and 241,000 new jobs in the prior month.

Housing prices continued to erode, the national purchasing managers' reports for manufacturers showed a major decline, and auto sales laid an egg as high prices and short supply drove customers away. At least initial unemployment claims went down and the purchasing managers' survey of services looked better than expected. Both the June monthly and the pre-Memorial Day week of data showed that the consumer has still not given up the ghost.

Unfortunately, based on news already in the pipeline, even worse numbers lie ahead. A confluence of Japanese auto and supply chain issues, bad weather, record gasoline prices, and stagnant wages have produced a perfect storm of negative news that is exceptionally difficult to disentangle. The good news is the Japanese situation is on the mend and improving faster than earlier anticipated. And I have to believe that weather effects (too cold to buy summer clothes, too wet and rainy to begin home and garden projects) will run their course.

Robert Johnson, CFA does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.