Warning: Millions About to Lose Their Job – The Alarming Truth You Need to Hear!

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this is bad I’m your host Steve an meter and thanks for joining me today and our show today despite the fact that the political lead from around the world continue to tell us that the labor market is strong and robust we’ve seen shifts in consumer spending habits that indicate it’s anything but and this is the alarming truth that things have now changed based on some recent data we got today as I’m about to show you millions of workers from around the world are soon to hit the unemployment line now let’s over to Bloomberg where he picked today’s story up with the headline is US manufacturing activity contracts for a fifth straight month and this is dangerous because it’s not just the us we’re seeing further contractions in manufacturing sectors based on the survey data from manufacturers all over the world and what this is telling us is the economy from the global perspective is entering a contraction and where manufacturing goes Services follow it’s now a foregone conclusion we’re headed into a recession and here we can see the US manufacturing shrinks for a fifth straight month now as we see the ism data drop to 47.2 which was still better than last month at 46.8 now the key part here is it even though it is in contraction it got marginally better the issue is it’s the fifth straight month things are getting worse and that’s not the the evidence we needed to see a no Landing or even that better case here a soft Landing scenario what is telling us is the global economy in particular the US economy which was supposed to be resilient is now rolling over into a recession the group’s measure of production slid for a fifth month deeper into contraction territory to the lowest level since May of 2020 and keep in mind that was just after the pandemic hit the gauge of new orders which showed bookings are shrinking Dro to a 15mon low and this is critical because if you work at any type of business that’s in terms of manufacturing new orders are your lifeblood you need them so when this gets smaller and smaller as we see further contraction here it puts pressure on the other side of the business the backlogs and when those are gone well you don’t need as many employees and that’s the problem we’re facing for manufacturers All Over The World Export orders also shrink at the fastest rate since the start of the here despite the fact that we see a weaker dollar declining orders and persistent Retreat and backlogs remain headwinds to production and illustrate a struggl manufacturing sector while the ism gauge of factory employment Rose it remained in contraction for the third straight month so why we hear from again from the political leads that we saw perhaps a one-off non-farm payr report why we’re at just about at the peak rate of unemployment what we’re seeing is it’s going to get worse and this is what Fed chair Jerome Powell indicated at Jackson Hole Wyoming that he finally is waking up to the reality is that they didn’t hit their targets that we are indeed heading a recession and he’s worried about this is why he wanted a rate cut at the last meeting and why we’re likely now to get two cuts that be 50 basis points at the mid-september meeting coming up and we talk about capacity utilization is very important to understand this has everything to do with inflation when we look here at capacity utilization shown in blue because we talk about decreases in production now why does that happen because demand goes away that’s the issue here and with your manufacturer and you’re seeing a big decline in new orders what is it telling you it tells you your price is too high so what happens of course that means you see prices come down and it’s exactly what you would expect the Consumer Price Index shown in red on a year-over-year rate of change when you see a decline in capacity utilization it means inflation is coming down down you see this throughout Cycles going back to the 1960s each and every time and so as everyone believed we are going to see a Resurgence in inflation the latest data on capacity utilization in terms of production output indicates inflation is coming down that means panic mode for Central Bankers all over the world who are going to be eager to get some rate Cuts in but we talked about the effectiveness of Ray cuts and they’re absolutely none they’re not going to make any changes the problem is everyone believes they will but the reality is as we look to manufacturers around the world and particularly here in the US it means millions are about to hit the unemployment line because when capacity goes down in a factory you don’t need as many workers so the first move is you cut hours the second move is if your order books don’t increase you start cutting heads and sure enough you can see the near mirror relationship between capacity utilization in blue and continued unemployment claims in red and any time you see capacity utilization slow down you see a sharp increase in continued claims because what happens is workers get on the unemployment line there are no opportunities Elsewhere for them and as they lose their spending power as their income drops well that back feeds into the economy demand goes down and further price decreases start to show up but we can also see this in the New Order book as we now look at manufacturers new orders of durable goods they shown in red on a year-over-year rate change against capacity utilization and it makes perfect sense because as new orders go down well that means of course demand at your factories going down and how much percentage of it is being utilized also goes down we see that Trend now the current trend of new orders heading lower we did get a one-off jump due to Boeing many believe this was the bottom in a turnaround the reality is the ism just flagged that this is not the bottom which is why we saw a selloff in equities and why we saw saw bond prices rally today as the market is starting to figure out the FED did not engineer the soft Landing they didn’t engineer a no Landing they did what they do every time with 100% accuracy is tighten Financial conditions until we head into a recession an elevated borrowing cost and uncertainty surrounding the November presidential election are prompting some companies to hold off Capital expenditures and hiring and I disagree with that completely I do not believe it’s election related and believe it has everything to do with the consumer they just don’t have the money and we talked about the savings rate last week and why this is so important it’s been drained down and at some point consumers are going to need to save more and why is that because there’s not opportunity in the economy there isn’t enough wage growth there’s not enough hours people are falling behind and that’s the real issue here is consumers are seeing a shift in the economy and they’re reacting what they’re spending it really isn’t a factor of the election and still the Federal Reserve policy makers are expected to be in lowering interest rates later this month which should offer some relief but the problem is we know it offers absolutely no relief everyone’s saying gosh if we could just get some rate Cuts it’ll turn things around the reality in the past we’ve seen rate cuts and they do absolutely nothing to change the trajectory of the economy as we look to of course consumer habits and how it back feeds into manufacturing we just look at new orders but again it all comes back back to retail sales you see here in red we’re now looking at Advanced retail sales this is inflation adjusted so it’s real retail sales shown in red on the year-over-year rate change and you can see in decelerations in retail sales well that means of course retailers don’t need as much inventory wholesalers don’t need as much inventory so manufacturers don’t need to produce as much inventory and that means capacity isation goes down you see that happen here in the dot bubble you see it going into the global financial crisis you see it even around 2015 2016 just a mild slowdown in retail sales led to a huge drop in capacity utilization we see that happening again going into the pandemic in the early stages and look at now we’re sitting at this virtually zero band where we see inflation adjusted retail sales can’t even generate a Plus on the column that means of course consumers aren’t buying enough and there isn’t a demand that means of course factories are going to see their production decrease they’re going to see their us ation decrease and that is not what we’re looking for what it means is people are going to be hitting the unemployment line the problem is it’s not just a US issue it’s not just China it’s not just Germany it’s going to be every major industrialized Nation because I want you to think back to the pandemic we pumped up the global economy with massive amounts of stimulus and low interest rates and everyone believed that suddenly we were in The New Normal that everyone believed that everyone was set back and they needed of course to unleash the animal spirits to go out and spend money the reality is without all that extra stimulus you see the global economy come crashing down it’s exactly what happens when you overstimulate you get a crash and that’s what’s coming because we can now look to retailers inventory show in red if on a year over-year rate of change and you can see here as it rises you notice the zero band right across the Horizon here you see Rising retail inventories on a year-over-year rate change what happens when you don’t get spending well you see decrease in pass utilization as retailers just start ordering less you see that happened here around 2004 to 2006 as we headed into the financial crisis you see it led to slow down around 2015 it was just a matter of too much inventory happened again in 2018 to 2019 and look it’s happening again now you can very clearly see there just isn’t Consumer demand because wages are not keeping up with inflation they’re not getting enough hours and sure enough that means demand goes down even worse as people get to the unemployment line their incomes drop you see a further decrease in demand it starts to spiral right out of control and one favorable development in the latest ISM data is that manufacturing customers are better managing their inventory levels and this is a problem because the gauge of customer inventories has shown shrinking stock piles every month since late last year so what we’re seeing here is custom or customers of Manufacturers are trying to weed down their inventory to levels the problem is they’re not seeing enough new demand to go to manufacturers and put in big orders this is why the order book is coming down and this is a problem because this means manufacturers need to get their inventory in alignment before it gets out of control this is the other problem we’re seeing why aren’t they laying off why haven’t they been laying off because manufacturers are building inventory let’s take a look here at the ism data because look at this we see for 5 months new orders in contraction production in contraction for 3 months employment in contraction for 3 months it makes perfect sense you don’t have the order book you don’t need the workers inventory levels now stabilizing but still too high customer inventory is going down because they want to get through that inventory they want to weed it down because they know it’s a pain point but look at this prices paid are going up this is a dangerous problem here people can’t afford it manufacturers know it and one way to get your cost down is to cut your employees This Is A Dangerous Game we’re playing here look at this backlogs of orders 23 consecutive months they’ve been chewing through it at some point there’s going to be nothing left here and that’s why you’re going to see more and more people all around the world Hit the unemployment line even new export orders which many believe would rise on a weaker dollar didn’t happen because we’re headed into a global recession now let’s turn to S&P Global where we get some further information here as production and their books fall for the the first time in 7 months but look at this decline in demand this is exactly the case we’re making leads to firms to scale back output renewed reduction in employment that’s key inflationary pressure strengthened so we’re looking at stagflation here my friends this is where you get Rising unemployment and Rising prices of course we know how that plays out historically prices don’t continue to rise at some point they roll over and head down as we come crashing into recession this is exactly what happens you know you see in in the past big increases in inflation it inevitably leans it right into a recession we’re on the exact path it just took a lot longer than most people expected the problem is they piled in US equities on the hope the FED got it right they’re starting to figure out they didn’t and despite a reduction in capacity manufacturers were again able to work through outstanding business as new orders fell Solly so what you’re saying here is they had plenty of workers to handle the decrease in business in fact they had so many workers that backlogs of work were depleted for the 23rd month running this matching the ism and at the fastest Pace since April so they’re really getting quick through these backlogs this is a problem because it’s telling us they’re running dry they’re almost gone that’s the danger part here and on contrast to the picture for stocks and purchases inventories of finished goods increased during August the second month in a row in which this has been the case some response indicated they had made use of the spare capacity provided by a reduction in client demand to replenish stocks of finished products While others noted unintended here’s a key word unintended inventory accumulation so they continue to build it and hopes people would come they’re buying into If the Fed Cuts people will buy once we get past the election people will buy but what they don’t realize is we’re headed into a recession so at some point these manufacturers are going to see continued declines in new orders they’re going to have no backlogs and plenty of inventory you figure out exactly what happens next it’s called pink slips and as was the case with production manufacturers saw a renewed decline in employment Midway through the third quarter Staffing levels decreased for the first time in 2024 so far as we looked to the end of the week for a blockbuster non-farm pay report that I said is not going to happen and what this reflects is falling new orders and lower output exactly what you need to get rid of overstaffed companies this is dangerous because again we’ve been told we need to see the economy rebound we’ve been told the labor market is strong and robust and we’re about to find out it’s anything but but let’s take a look at some of the details from the ism report look at what these respondents are saying a no will slow down in business activity backlog if dropped at half as invoicing remained strong but orders have slowed significantly New Order intake is sluggish at best interestingly even though orders are down inquiries are up so people are checking in to see what the prices are but not buying and customers have indicated Capital has been approved for equipment purchases but they were directed to put projects on hold until the fourth quarter of 2024 now they note this indicates the uncertainty around the election it doesn’t indicate that at all what it indicates is they’re hoping that the economy turns around because it doesn’t those orders are not going to go through you watch and see because we are heading now squarely into recession our order levels are on a slow steady decline business is cooling down everything is headed the wrong direction which is why we see some validation in the energy markets here as Brent crew trembles below $75 a barrel erasing all the 2024 games and you might remember not long ago investors were Mega bullish on energy they thought that this is exactly what you want to see in the early stages of an economic boom we warned you that wasn’t the case and sure enough when we look at capacity utilization here against West Texas intermediate crude oil prices what you see is a wonderful relationship that is De and goes down the factory level well Energy prices follow and so yet everyone remains bullish on Rising Energy prices because OPEC plus is trying to constrain of course what’s going on in the market to drive prices higher what we’re seeing is a setup for Energy prices now to head even lower this is going to be a boom for consumers who are looking for pennies right now anything they can save expense wise because they need the money but it’s not going to be enough to turn around the economy because where this is going I want to show you what’s happening in Germany now because it’s a leading indication of what happens when demand comes crashing down as VW weighs the first ever Germany plant closure to cut cost and remember if you don’t have demand and you have too much capacity well eventually you start to get rid of things that are expensive this is factories you start to trim your production facilities back to save money because inflation is running out of control here still and yet demand is saying prices need to come down VW waking up to the reality wait till this happens in America we start seeing Factory closures because the potential measures also include trying to end the company’s three decade old pack with workers to keep jobs secure the company said on Monday and vw’s main target is this underperforming namesake passenger car brand whose profit margins are getting squeezed and been sputtering transition to EVs and here’s a key bar consumer spending slowdown so part of this has to do with the fact that China wanted to dump a bunch of cheap EVS into Germany we know they wanted to do that it was going to destroy part of Germany’s automobile business and it’s doing that you can see these manufacturers like VW are hurting and any shutdowns would marked the first closures in Germany during the company’s 807e history if you can imagine that but look at this we talk about utilization we talk about Factory we talk about production here’s the data Volkswagen last year made roughly 9 million Vehicles compared with total capacity 14 million makes perfect sense when you look at this from a business perspective they don’t need the factory running because it costs them money they need to get their expenses down so they can be more competitive means more workers headed to the unemployment line more demand is getting destroyed because the automotive industry is facing major challenges worldwide and is undergoing a profound transformation to say the least that requires companies to make strategic decisions it’s essential that companies and management act responsibly in close consultation with social Partners which is all bunch of fancy words for send people to the unemployment line so now you see why based on the latest manufacturing data we got today out of the United States that we are headed into a recession this is mirroring exactly what we’ve seen months ahead in other parts of the world and what it suggests is that millions of workers not just Americans from all over the world are soon to hit the unemployment line and with that I’m Steve Van Meter thanks for watching thanks for being fans bye now

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