JOLTS Report Shows Signs Of Slowing Job Market

Gold prices higher on safe-haven buying as traders keep an eye on Ukraine. U.S. stocks end lower, Nasdaq declined for 4 straight days. Gold last traded at $1,346 an ounce. Silver at $20.82 an ounce.

There are fresh signs this morning that the US job market is indeed slowing down and as a result, all three major US stock indices are down this morning.

The Bureau of Labor Statistics’ JOLTS Report did not paint a pretty picture. JOLTS stands for “Job Openings and Labor Turnover Summary” and it is one leading edge measure of the employment market watched by new Fed Chair Janet Yellen.

Job openings came in at 3.974 million, below the 4.015 million most economists expected. Meanwhile, the number of layoffs and discharges rose to 1.74 million in January from a recent bottom of 1.51 million in November. In addition, there were 4.54 million hires in January, below 5.04 million when the recession started at the end of 2007, signaling that the labor market still hasn’t made up all of the ground that it lost during the downturn.

The number of people quitting jobs slipped a bit in January for the second straight month. Quitting is evidence of a vibrant job market because it shows hiring is strengthening enough for more people to leave existing positions.

Employment market trends are heading in the wrong direction with data signaling that workers’ confidence in the economy is flagging.

This is having a negative impact on the US dollar as investors are worried the US economy is once again trending toward recession.

The stock market doesn’t like this news, but the stock market’s problems extend far beyond today.

Markets are entering a dicey phase according to index fund pioneer and founder of The Vanguard Group, Jack Bogle.

Meanwhile, one of the world’s most respected investors has raised the alarm over a looming asset price bubble, calling out “nosebleed valuations” in technology shares like Netflix and Tesla Motors and warning of the potential for a brutal correction across financial markets.

Seth Klarman, the publicity-shy head of the $27 billion Baupost Group whose investment opinions have attracted a near cult-like following, said that investors were underplaying risk and were not prepared for an end to central banks reversing a five-year experiment in ultra-loose money.

While noting that he could not predict exactly when a significant market correction would occur, Mr Klarman wrote in a private letter to clients: “When the markets reverse, everything investors thought they knew will be turned upside down and inside out. ‘Buy the dips’ will be replaced with ‘what was I thinking?’ . . .  Anyone who is poorly positioned and ill-prepared will find there’s a long way to fall. Few, if any, will escape unscathed.”

Finally, Irwin Kellner, MarketWatch’s chief economist, lists five reasons why stocks will fall.

The first is that most stocks have already gone up an awful lot over the past five years. Last year alone, the Dow rose more than 30%! This is more than the economy has risen in total since the end of the last recession. It also beats the rise in corporate profits by a wide margin.

The second is that profit takers are already beginning to exit the market. In this environment it should be no surprise that many investors and traders have decided to take some money off the table.

Reason three is nerves. The market has been extremely volatile of late, going up a lot one day, and down about as much on the second. It’s a trader’s market, not one for the faint of heart, a.k.a. the average investor. An increase in volatility usually precedes a drop in stocks as market participants rush to get out of the way by selling en masse.

The fourth reason is the economy, which has slowed significantly since the end of last year. It does not seem that the markets are prepared for just how bad the first quarter’s growth was or how much this slowdown impacted sales and earnings.

The last is the perennial fear of geopolitical tension. In this instance, what looks to be a renewal of the Cold War between the United States and Russia.

Lots of economies in Europe and elsewhere are dependent on us and Russia for both imports and exports. A new Cold War could put the kibosh on such trade.

All of this also makes a strong case for gold, since gold has historically moved independently of stocks. That makes gold an excellent diversification vehicle to provide a degree of security and stability to a portfolio overweight in equities.

Gold Prices Shine On Fed Statements

Gold prices extends streak, but fell just short of $1,300. U.S. stocks break four-day winning streak. Gold last traded at $1,295 an ounce. Silver at $20.34 an ounce.

In a recent interview, Federal Reserve Bank of St. Louis President James Bullard stated he was “still optimistic” about the outlook for the economy and predicted a growth of 3%, or more, this year. His statements gave stocks early gains today, which they struggled to maintain later in the day.

This came just one day after Federal Reserve Chairman Janet Yellen said she is planning on continuing the strategy of trimming stimulus in “measured steps.” However, many criticized the new chairman for her inconsistent remarks regarding employment data. Yellen dismissed reports showing last month’s hiring rose by only 113,000, significantly less that the 180,000 forecasted. Yellen expressed that she was “surprised” by these figures but felt there was “progress” in the labor market.

As many know, the unemployment rate doesn’t always tell the whole story and may not be the best measure of the job market because the data only includes individuals who have searched for work within the last four weeks. In the latest report, the unemployment rate had dropped to 6.6% in January. However, a record 91-million adult Americans aren’t looking for jobs, the highest level since 1978, and therefore are not counted in the unemployment rate. Not everyone in this category are discouraged workers, some of these individuals are students or stay-at-home parents who have chosen not to work.

The most recent Jobs Openings and Labor Turnover Survey, or the JOLTS report, showed December was the worst month for job creation since August 2012. Layoffs have hit a four month high and employers are hiring fewer workers than any month since June. This data shows the labor market may not be as strong as Yellen thought.

With all of this instability and inconsistency in the markets gold is the place for investors to seek safety and security. Today, gold reached a three-month high while Silver caps its best rally since 2011. This would extend gold’s streak to a sixth straight session. Both metals rallied on speculation that U.S. stimulus will continue to boost the appeal of alternative assets. So far in 2014 gold has rallied 7.7% amid a slump in emerging-market currencies and rising physical demand.