Market Roundup
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Oil +$0.88 to $46.10
Awful. Hideous. Jaw-dropping.

Take your pick of adjectives – they all apply to the jobs report we got out of the Labor Department today. To quickly summarize:

ArrowThe U.S. economy added only 142,000 jobs in September. That was a huge miss to the average forecast of 205,000. Worse, the figures for August and July were revised downward by a combined 59,000 jobs. That confirms the labor market has been decelerating all summer.

ArrowYes, the unemployment rate held at 5.1%. But average hourly earnings actually dipped ever so slightly, against expectations for a gain of 0.2%. The average workweek also fell 0.1 hours to 34.5 hours.

ArrowBy sector, manufacturing lost 9,000 jobs … mining lost 10,000 … and wholesale trade lost 4,000. There was a bit of strength in non-economic sectors like health care and education, as well as retail. But the labor force participation rate sank by another two-tenths of a percentage point to 62.4%. That was the lowest since October 1977.

The September jobs report was far worse than expected.

ArrowThe “diffusion index” compares the number of industries adding jobs to those eliminating them. The lower the number, the fewer industries that are boosting employment. It sank to 52.9 in September from 55.5 a month ago and 61.4 a year ago. That’s the worst reading since February 2010!

So in a nutshell: The job market has been worsening for months. The weakness is the most widespread in almost six years. Americans who are employed aren’t making more money, and they’re getting fewer hours. And more and more are dropping of the labor force entirely.

Look, I don’t care how the Wall Street pundits try to spin this one or the late rally in the market today. But the figures clearly confirm that the warnings I issued recently on inventories, trade, manufacturing and lousy foreign growth were dead-on target.

They also confirm what I wrote just two days ago, saying in no uncertain terms that Wednesday’s ADP report would be “the last strong jobs number for a LONG time!” I added that optimism about the domestic economy, in the face of major challenges in several key sectors, was “patently ridiculous.”

I wish this weren’t the case. I wish we had a gangbuster economy. I wish that all of the easy money and other policies central bankers enacted in recent years actually worked for the real economy, rather than just inflated a bunch of unsustainable asset bubbles.

“The job market has been worsening for months.”

But that isn’t reality. Data like today’s jobs report prove it. So I believe you have two very important choices as an investor. You can …

ArrowStop listening to the same old tired Wall Street rhetoric and take matters into your own hand. Raise cash, buy hedges and lower your stock exposure when you get countertrend rallies like today, as I’ve been advocating for the past several months – since BEFORE stocks started to tank.

Even better, you can add investments that RISE in value when stocks FALL. That’s precisely what I’ve been doing in my Interest Rate Speculator service. Those investments are surging in value, giving subscribers the opportunity to bank several triple-digit profits in the past several weeks.

Or …

ArrowKeep believing the bulls who refuse to acknowledge that central bank garbage no longer works … who refuse to acknowledge that serious global problems can’t stay bottled up overseas forever … and who refuse to heed the messages of the bond markets, the currency markets and foreign stock markets.

I know which choice makes the most sense to me. I’ve been doing all I can to guide you to the proper path. And you can be darn sure I’ll continue to do so as this grim reality continues to exert its influence on markets in the months ahead.

So now that we know what “officially” happened in the labor market last month, what are your thoughts? Is this going to hammer stocks even harder, or have they already “priced in” weakness? Is this as bad as things will get for jobs, retail sales and production … or is there even more weakness coming down the pike?

Any other thoughts you have? Please don’t hold them in; instead, head over to the Money and Markets website and share them with us all.

Our Readers Speak

Ahead of these figures, several of you already weighed in with your thoughts on the economy and the markets.

Reader Phil S. said stocks can withstand weaker data, and that certain parts of the economy are still hanging in there. His comments:

“As long as the ‘Greenspan Put’ is alive and well, the bubbles will expand. The talking heads yesterday were so excited about the record-high vehicle sales … never once mentioning the subprime auto loan debacle. The ISM data is not encouraging. However, where I live in Illinois, it’s gangbuster residential, commercial, and municipality growth.”

But Reader Donald L. warned that conditions are clearly taking a turn for the worse. His take: “Nobody believes government statistics for good reason, now confirmed. Industry sees no visibility in the future and no confidence. Result: Apprehension about moving in any direction, so no movement.”

Reader Chuck B. also agreed that the job outlook isn’t very encouraging: “With all the layoffs we keep reading about from the major companies, where is the BLS finding all these jobs they claim people are filling?

“Is it possible that smaller, newer companies are taking up the slack? We can hope so, but other figures say small businesses are failing at a higher rate than they have in years. Something doesn’t jell.”

Lastly, Reader Russ C. said: “Manufacturing (wealth creation) is the wage earner for the nation. The service sector is the cost of maintaining the nation. When the service sector exceeds manufacturing plus income from overseas investment, we are on our way to bankruptcy.”

Thanks for sharing your thoughts. I was tepidly optimistic about the U.S. economy for the last few years. That view was the correct one, at least from an investment standpoint. I say that because you were able to rack up steady market gains by zeroing in on financially healthy, highly rated stocks in select sectors like I did.

But I strongly believe that conditions have been deteriorating for several months now, and are likely to get even worse. That’s why I’ve been recommending dumping a large amount of stock exposure, hedging against downside risk, and shooting for large profits in select trading services I manage. I’ll let you know if and when that outlook changes … but it’s unlikely to be anytime soon.

By the way, you haven’t missed out on your chance to comment on these very important issues yet. Just head over to the website and let me hear from you over the weekend.

Other Developments of the Day

● There was another horrific school shooting late yesterday, this one involving a community college in Roseburg, Oregon. Ten students were shot dead, while seven others were wounded, when a 26-year-old went on a rampage on campus. He was shot dead by police, who are still trying to figure out a motive for the latest senseless mass murder.

● So much money is fleeing high-risk emerging markets that we could see a full-year outflow for the first time in 27 years. The Institute of International Finance estimates foreign investors will pull $540 billion out of EM economies, while EM residents will send several hundred billion additional dollars abroad.

● Supermarket chain Albertsons will be coming public again, as part of an IPO expected to raise roughly $1.5 billion. Private equity firm Cerberus Capital Management wants to sell 65.3 million shares for $23 to $26 each, with the exact timing still to be determined. Recent IPOs have fared poorly throughout 2015 so this one is worth watching.

● We got some good news overnight on Hurricane Joaquin, with the 120 mph storm likely to miss the eastern U.S. based on the latest computer models and National Hurricane Center forecasts. The season is past its peak and will steadily wind down from here into its Nov. 30 conclusion.

Is there anything we can do in this country to stop senseless shootings like what happened in Oregon? What will happen as funds flee emerging markets in droves? Any other stories catch your attention in the last day? Then tell me about it over at the website.

Until next time,

Mike Larson