Factory job cuts in June hit levels last seen during the financial crisis and Covid. The same report shows manufacturing doing better than expected. These two facts exist in the same document from the same company using the same data.
S&P looked at June and saw bosses firing workers at a rate that would make 2008 nervous. Then S&P looked at their manufacturing index and saw growth. The growth came from an inventory rebuild. Companies stacked boxes in warehouses while throwing workers into the street.
Inventory rebuilds mean nothing. A company buys widgets it already made last month and puts them on a shelf. S&P counts this as manufacturing momentum. The manufacturing momentum required so few human beings that firms cut jobs at financial apocalypse rates.
Retail traders will read manufacturing index beats expectations and buy factory stocks. They will ignore the part where factories decided human labor costs too much during a growth period. They will check their portfolio in three months and discover their shares are worth less than the phone they bought them on.
The gap between the index and the jobs data is not a paradox. It is not a mixed signal. It is the entire economy explained in two numbers. Businesses optimized for profit per employee instead of profit per widget. Shareholders got richer. Workers got fired. The index went up.
S&P published this report knowing every analyst would call it confusing. Nothing about this is confusing. Manufacturing improved because companies fired expensive workers and counted cheap inventory. The metric improved and the humans suffered. This is exactly what the system was designed to do.
Your technical indicators cannot price in mass unemployment during an index beat because technical indicators are lines on a chart made by a computer that thinks job cuts and inventory builds are both just numbers that go up.
Photo by Cemrecan Yurtman on Unsplash
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