Markets drift lower as economy might be starting to show faults

Dow slid back 46, decliners over advancers 3-2 & NAZ was off 62.  The MLP index fell 1+ to 272 & the REIT index added 2+ to the 375s.  Junk bond funds edged higher & Treasuries saw more buying which lowered yields again (more below).  Oil was off another 1+, taking it under 73 for another 4 month low, & gold dropped 29 to 2339.

Dow Jones Industrials 

US job openings tumbled in Apr to the lowest level in more than 3 years, the latest sign that the labor market is cooling off as the economy slows.  The Labor Dept said there were 8.1M job openings in Apr, a decrease from the downwardly revised 8.35M openings reported the previous month.  The forecast expected a reading of 8.3M.  It marked the lowest level for job openings since Feb 2021.  The Federal Reserve closely watches these figures as it tries to gauge labor market tightness & wrestle inflation under control.  Still, job openings remain historically high.  Before the COVID-19 pandemic began in early 2020, the highest on record was 7.6M.  There are roughly 1.5 jobs per unemployed American.  The number of Americans quitting their jobs, meanwhile, was mostly unchanged at 3.6M, roughly 2.2% of the workforce, indicating that workers remain confident they can leave their jobs & find employment elsewhere.  The report also indicated that layoffs were largely unchanged last month, hovering around 1.5M.

Job openings unexpectedly fall in April to lowest level in 3 years

Neel Kashkari, the pres of the Federal Reserve Bank of Minneapolis, says one of the things he has learned in the past few years is that consumers would rather see the economy fall into a recession than to continue to suffer the pain of soaring prices.   "The American people – and maybe people in Europe, equally – really hate high inflation," Kashkari said.  "I mean, really, viscerally hate high inflation."  The Minneapolis Fed chief said the labor leader represented workers in grocery stores & hotels, not higher-paid laborers like autoworkers or welders.  "She said to me, ‘Inflation is worse than a recession,’" Kashkari recalled.  "That is contrary to conventional economic thinking. And I said, 'I don't understand that. How can inflation be worse than a recession? In a recession, you lose your job. Inflation is paying higher prices, [but] you still have a job.'" Kashkari said the labor leader told him that her members were used to dealing with recessions, & the way they get through a recession is by relying on friends & family.  For instance, if they lose their job, they can lean on a sibling, parents or friends for help.   But high inflation affects everybody, she told the Fed pres.  Meaning, there is no one in her members' networks that they can lean on for help because everyone they know is experiencing the same thing.  "That was a profound comment for me to hear," Kashkari said.  He said that comment led him & the economists at the Minneapolis Fed to debate it a lot because the labor leader "was on to something."  "If you look now, the economy is, in the U.S., quite strong, the labor market is strong, inflation is coming down, and many, many people are deeply unhappy about the status of the economy," Kashkair said.  "I think it's because of the high inflation that they've experienced."

Fed president: People would rather have recession than high inflation

Treasury yields slipped as investors considered the latest economic data & what it could mean for the economy.  The yield on the 10-year Treasury was down by nearly 3 basis point at 4.364% & the 2-year Treasury yield was last trading at 4.79% after dipping about 3 basis points.  Yields & prices move in opposite directions & 1 basis point is equivalent to 0.01%.  Employment data from the Labor Dept showed 8.1M vacancies in Apr, compared to an estimate that called for 8.4M, the lowest level in over 3 years.  The fresh reading is fueling investor hope that the labor market is perhaps weak enough to allow the Federal Reserve to cut interest rates.  However, further weakening could also fuel worry over an impending recession.  Yields had fallen, with the 10-year Treasury yield tumbling close to 12 basis points, after economic data indicated a contraction of the manufacturing sector.  The ISM manufacturing index came in at 48.7 for the month of May, below the expected 49.6 figure.  Readings below 50 indicate a contraction.  Tomorow ISM's services index will also be released, giving investors insights into another sector.  Also this week, the May jobs report is due, providing fresh data from the labor market, including nonfarm payrolls & the unemployment rate.

10-year Treasury yield continues June slide on signs of weak labor market

Dow started to go higher at the opening, but the bulls could not stay in command.  There are more indications that the economy is slowing.  While that may give courage for the Fed to begin lowering rates, thoughts of headwinds in economic activity are not welcome by investors.