Signs of a Slowdown

Seasonal jobs are harder to find this year... The economy is still not 'back to normal'... Eyeing the jobs market... 1.9 million Americans on unemployment benefits... Front-running the NBER... Mailbag: More on Charlie Munger...

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Paying Santa Claus' bill is harder this year...

And not just because of higher prices for gifts...

You may have noticed fewer part-time job openings leading into this holiday season, either on storefront doors or online job sites. It's not just you. For hundreds of thousands of Americans who seek part-time holiday work, there's just not as much opportunity this year...

According to workforce consultancy firm Challenger, Gray & Christmas, American retailers have so far announced 573,000 seasonal positions... the worst showing since 2013. This figure is only a modest decline from where things stood at this time last year, but it's a far cry from the nearly 1 million people retailers were seeking by November 2021, more than 800,000 in 2019 and 2020, and more than 700,000 in 2018.

Social networking and business website LinkedIn recently reported a 50% drop in seasonal-job postings on its site compared to the same July through October period last year...

And job search engine Indeed recently reported a 6% drop in posts for seasonal jobs nationwide compared with 2022, but a 19% increase in people looking for those jobs.

Anecdotally, while I (Corey McLaughlin) usually get e-mails from Amazon about seasonal hiring at its Baltimore warehouse and distribution hub, I haven't seen such messages this year.

Add it all up and these are signs of a slowdown...

Go figure... Pandemic stimulus programs have finally run out, and everything is a lot more expensive than it was just two or three years ago. Enough people want to work – so they can spend more money this holiday season (and thus power the economy) – but now it's looking harder to find a seasonal job because businesses don't want to hire as much.

Perhaps retailers can't afford the cost of more employees, or they're simply gun-shy about adding more expenses given economic uncertainty and the state of the U.S. consumer, or some combination.

Whatever the reasons may be, the point is retailers on balance this year don't seem to need as many seasonal workers to keep up with the demands of Santa Claus and his elves.

We've gone from businesses not being able to find people to work... to not wanting people to work. Take note. Something has to give... Most likely, look for people spending less money...

Though also note the context...

The economy is still coming off the stimulus highs of 2020 and 2021, which were abnormal.

For instance, the National Retail Federation expects holiday retail spending to grow at its pre-pandemic clip of 3% per year and to hit a new record total. But it also notes that seasonal hires should be down 40% from their 2021 highs.

More and more, we can say again: What happened in the financial world during the pandemic – notably the 40-year-high inflation that ensued – was a heck of a thing, if you consider the thing distorting and devaluing the worth of a dollar.

As our friends at Bonner Private Research noted today...

According to a report published earlier this week in Bloomberg, it now costs $119.27 for a family to buy the same goods and services it cost just $100 to buy in 2020. Remember that next time someone tells you inflation is dead. Real people live in a world where the actual price level (higher) matters more than the rate of change (still high).

For now, the market beats along...

And we'll beat this drum again because it's important...

For the past few weeks, "bad news" in the economy has translated into "good news" for stocks. Enough investors still expect the Federal Reserve to maintain its rate-hiking pause as "official" inflation numbers continue to ease.

Today, as we suspected, the latest widely-followed inflation gauge that the Fed prefers – the personal consumption expenditures ("PCE") index – continued to show disinflation... and Americans still spending more money than the month before...

Headline PCE showed a 3% year-over-year gain in October, after three straight months at 3.4%. Core PCE – excluding food and energy – rose 0.2% for the month (about "normal" to hit the Fed's 2% annual target) and 3.5% year over year. And the data showed consumer spending rising 0.2% for the month, too.

So, status quo on inflation. But maybe not jobs...

Today, Uncle Sam also reported an uptick in "continuing jobless claims" – which is a proxy for the number of people receiving unemployment benefits (after being laid off). This number rose to 1.93 million in the week that ended November 18, the highest level since late 2021 and higher than all the mainstream economist estimates for the week...

After declining in the middle of this year, the number of people receiving unemployment benefits has trended higher since September, up by nearly 270,000 people since early September...

Today, three of the four major U.S. indexes finished higher, with the Dow Jones Industrial Average up 1.4% to hit a new 2023 high. The benchmark S&P 500 Index and small-cap Russell 2000 Index closed roughly half a percentage point higher, and the tech-heavy Nasdaq Composite Index was down slightly. Overall, stocks are still in longer-term uptrends.

But as we've said before, continued "bad news" for the economy, particularly the American consumer and the job market, will eventually turn to "bad news" for the markets in general... And the effects are typically felt in the market before the Fed can step in with rate cuts to rescue things.

And if declining part-time holiday hiring is a sign of trouble for the overall U.S. unemployment rate in the future, that could be a catalyst for "bad news" in the economy turning into "bad news" for the markets in general.

We're still tracking unemployment in general...

We've talked about the "Sahm rule" a few times here this year... It's a measure of the change in the unemployment rate, and it has a perfect record of predicting recessions over the past 50 years.

This indicator is named for Claudia Sahm, an economist and one-time employee at the Federal Reserve. Basically, the rule says that whenever the government's unemployment rate rises 0.5 percentage points off a cycle low, we're in a recession.

It is also notable that Sahm is part of the National Bureau of Economic Research ("NBER"), the institution responsible for officially "calling" recessions. So if you want to front-run its announcement (which might come too late to make a difference for your portfolio, if it ever happens at all), this is one good way to do it...

As my friend Jeff Havenstein, an analyst on Dr. David "Doc" Eifrig's research team, wrote in Doc's free Health & Wealth Bulletin yesterday...

Specifically, the Sahm Rule takes the three-month average of the unemployment rate. Then, it compares that number with the lowest three-month average over the past year. Once the latest three-month average is 0.5 percentage points above the lowest three-month reading of the past year, that marks the start of a new recession.

Like I mentioned earlier, the Sahm Rule has a perfect record of predicting recessions over the past 50 years – although it did produce some false signals before 1970. But you'll see over the past three decades, the indicator has been very accurate in predicting recessions...

The indicator is currently sitting at 0.33. That means the unemployment rate has risen 0.33 percentage points from its recent low.

The good news... it's not flashing recession just yet. Again, it needs to hit 0.5 to signal recession. We're getting close, but we're not there yet.

Since October's unemployment rate checked in at 3.9% and the low for the past year was 3.4% (twice, in January and April), the headline unemployment rate is already 0.5 percentage points higher than its one-year low.

But as Jeff mentioned, the Sahm rule indicator measures the difference between the current three-month average of the unemployment rate (3.83%) and the three-month average of the bottom in the previous 12 months (which is 3.5% from December 2022 to February 2023, and then again from March to May). Thus the 0.33 reading presently: 3.83 minus 3.5.

How close are we? Let's delve deeper into the numbers.

With 3.8% unemployment in September and 3.9% in October, there are a couple ways this indicator could be triggered.

First, unemployment could hit 4.2% in November – to make a three-month average of 4% for a 0.5 percentage-point gain. Alternatively, the unemployment rate could gradually tick higher to average 4% over the next several months – which seems entirely possible.

This isn't the only indicator I'm tracking. But if you care at all about the unemployment rate's influence on the economy and markets, this suggests a possible big turning point... or at least ramped-up volatility early next year.

So, what to do about all this?...

If you're concerned about a recession ahead, one way to prepare your portfolio is to listen to folks who have been through these dire economic times before. Stansberry Research editors and analysts are preparing for all the possible outcomes.

We listen to what our friends are saying, too...

For example, right now, Joel Litman – founder of our corporate affiliate Altimetry – says he hasn't felt this nervous about the markets since 2008. Back then, he was waiting for the "other shoe to drop" based on concerning indicators he was seeing.

Then more than one shoe dropped in the form of the great financial crisis...

Joel also called the recession and market crash in 2020... and issued a string of 16 recommendations that went on to double or more.

Today, Joel – a forensic accountant who has lectured at the Harvard and Wharton business schools and is a regular consultant for the FBI and Pentagon – says he once again sees trouble ahead in 2024.

Maybe you're "really nervous," like famed investor Stanley Druckenmiller – and betting on short-term fixed-income plays to see you through. Or, to cope, maybe you're sitting on record-high levels of cash, like Warren Buffett.

Joel recommends another path... Next week, on Wednesday, December 6, he's going public with a new, free video (you can register here) where he'll explain why he's not suggesting you do either one of those things – and what his plan is instead.

Joel is calling this message a 'financial lifeline'...

What exactly do you buy – and when exactly do you buy it – for the best possible returns when the future of the U.S. economy is so uncertain?

To make it through the next crisis and the "brutal months to come" and protect and grow your wealth, Joel says it's wisest to take a different, tactical approach. To do this, he says you'll need the right tools to navigate a market that may feel like a minefield.

At Altimetry, instead of using traditional Wall Street analyses, Joel and his team use their "Uniform Accounting" methodology for analyzing companies' financial statements – making dozens of adjustments to uncover a company's true earnings and financial health.

This can help find mispriced companies poised for massive growth... and help you avoid owning shares of businesses that are perhaps overvalued by conventional Wall Street metrics, and whose warts may show in the next crisis.

If you sign up for the event ahead of time, you'll get free access to a version of Joel's "Perfect Stock Detector," which he partnered with our friend and Chaikin Analytics founder Marc Chaikin to create.

You can use this tool to get a letter grade on the health of more than 500 stocks. When you register, you'll get access to free special reports covering stocks to buy right now and five businesses that could go bankrupt in 2024.

Then, on Wednesday, at 8 p.m. Eastern time, Joel will go on camera alongside Marc to share all the details of his strategy and the exact steps he says to take with your money. He even plans to talk about what he's calling "The 40x Recession Trade," which could have grown your money by 4,000% during the recessions of the past 40 years.

This event is 100% free to attend – we just ask that you reserve your spot in advance. You can do so right here.

New 52-week highs (as of 11/29/23): Alamos Gold (AGI), CyberArk Software (CYBR), Intel (INTC), Cheniere Energy (LNG), London Stock Exchange Group (LNSTY), Palo Alto Networks (PANW), UiPath (PATH), Qualys (QLYS), Stellantis (STLA), and StoneCo (STNE).

In today's mailbag, more thoughts about what caused inflation... another potential seasonal indicator from a subscriber... and feedback on yesterday's Digest, in which we talked about Charlie Munger's passing... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.

"It is helpful to hear current perceptions from the boot. However, the main causal factor of Mr. D's observation was not presented. The cause of the inflated 'demand' was our brainless government not calculating the amount people needed as pandemic stimulus; instead giving everyone 4x more than they needed. Guess what? They went on a gov't spending spree. Result? Worst inflation in 40 years. People quit working because they made 2x more to stay home. Idiocy at its best." – Stansberry Alliance member James R.

"I've noticed within the last couple of years that more and more people are decorating the outside of their homes in Christmas lights than ever before. The displays are getting larger and more elaborate. This is in far contrast to the last great recession in 2008 when my home was one of the few that were decorated that year.

"This is a great indicator that the economy is still strong in 2023 for now." – Subscriber Rich D.

"Thanks much for your obit on Charlie Munger. It is one to file and review often. I will show it to my grandchildren. Like Charlie, my father came of age during the great depression. Coming from a family of tenant farmers he left an estate of close to a million dollars. We always said 'When dad got ahold of a dollar, it was awfully hard for that dollar to get away from him.' Charlie's words would have resonated with him. Great article, thanks again." – Subscriber Don G.

Corey McLaughlin comment: Thanks, Don. We're grateful to hear you'll share the essay with your family and you found it valuable.

For anyone interested in learning more about Munger, our friend and colleague Whitney Tilson – who knew Munger better than most and contributed to the terrific biography about him, Poor Charlie's Almanack – has another great post about Munger in his free daily newsletter today.

Whitney touched on a subject that we wrote about yesterday and that has always appealed to me: Munger's "blunt honesty." As we said yesterday, this trait was displayed in particular when Munger shared the Berkshire Hathaway shareholder meeting stage with Warren Buffett each year in Omaha, Nebraska.

Sometimes, Munger would say, "I have nothing to add" after Buffett delivered a long-winded answer to a shareholder question. Other times, Munger would pack a lot of force into a few brief lines. I always appreciated the window into how these two guys must have worked in the office together, bantering and ultimately making decisions to buy businesses or not.

As Whitney wrote of Munger...

He would say what he really thought of something or someone, which sometimes caused Buffett discomfort.

After one such moment at the 2015 Berkshire Hathaway (BRK-B) annual meeting, Buffett chuckled and gently chided Munger to "praise by name, criticize by category." Here's a collection of some of Munger's best zingers: Charlie Munger's sharp wit turned Berkshire meetings into uproarious affairs. Here's a sample...

• "What you don't want to be is like the man who, when they had his funeral, the minister said 'now's the time for someone to say something nice about the deceased.' And nobody came forward... He said 'surely somebody [has] something nice to say about the deceased.' And nobody came forward. And finally one man came up and said, 'Well, his brother was worse.'"

• "Sometimes when I am especially wistful, I think 'Oh, to be 90 again.'"

• "If you mix the mathematics of the chain letter or the Ponzi scheme with some legitimate development like the development of the internet, you are mixing something which is wretched or irrational or has bad consequences with something that has very good consequences. But you know, if you mix raisins with turds, they're still turds."

• "You particularly want to avoid evil or seriously irrational people, particularly if they are attractive members of the opposite sex. That can lead to a lot of trouble."

• "You don't have a lot of envy, you don't have a lot of resentment, you don't overspend your income, you stay cheerful in spite of your troubles. You deal with reliable people and you do what you're supposed to do. And all these simple rules work so well to make your life better. And they're so trite."

• "So far, I've had plenty of decline, but I'm pretty shrewd about the way I handle it. And so far the results have not been that bad in my old age. Now, my sex life would be a different subject." (Here's the video of this last hilarious comment.)

You can read Whitney's entire post from today here. You can also check out his remembrance and reflections on Munger from yesterday here. I'm planning to find my copy of Poor Charlie's Almanack and read more of Munger's commentary from over the years in the next few days and may share more nuggets next week.

All the best,

Corey McLaughlin
Baltimore, Maryland
November 30, 2023