The Economy Just Started Faltering | Dangerous Report

[00:02] The US economy has just hit its sharpest decrease in jobs since May of 2020. That's not good since that's basically right after the COVID panic that hit in right after the COVID panic that hit in March of 2020 and the mass job losses

[00:16] that ensued between April and September of 2020. Anytime we draw a line and we go back to worse since CO, it's not good. And so in this video, I want to give you an early warning of, you know, not something that's saying, "Oh,

[00:30] clickbait. Go run for the hills. Everything's over." No, this is just an early warning. This is a video where we're actually just going to look at some real data and go, [snorts] "Yeah, Kevin, you know, that is kind of

[00:44] bearish. That is kind of not good." And I'm not saying I want to be a bear. We were just buying the dip. You know, I set course members an alert on, hey, here's what we just bought. you know, we added some stocks and we're breaking

[00:56] through Y and we're doing our analysis. We we love doing fundamental analysis. You all know that we we love this stuff and so this is problematic. Let's get into exactly what the numbers are and potentially why some of these things are

[01:10] occurring. Uh so we'll go through multiple different sources here uh and chart in just a moment which is exceptionally important but let's start right here. S&P Global US manufacturing PMI sharpest fall in employment since

[01:24] May of 2020. Now, this is really odd really been paying attention to the labor market as, hey, it's been doing good. At the end of 2025, it was doing terribly because we had all the tariff

[01:39] nonsense that the economy had to absorb. And then on top of that we had you know roughly probably somewhere around a million uh people deported out of the country either self-deported or deported by ICE. So our labor force shrunk shrunk

[01:52] by about a million workers. Uh not necessarily all of that was because of of ICE. But our labor force did shrink. So we had a lot going on in 2025 and we sort of excused that. Oh it's tariffs.

[02:04] know it's this or whatever. And then we got this recovery at the beginning of 2026. We're like oh yeah that's good. That's good. So why now are we seeing this decline again all of a sudden in a June 2026 report, you know, that came

[02:19] out here in July. And so the comment here is that employment remained a weak point at the end of the second quarter with job shedding at the fastest pace since May of 2020. Uh excluding the pandemic, uh this was the quickest uh

[02:34] going all the way back to October of 2009. So if you include the pandemic, it was the worst since May of 2020. If you exclude the pandemic, it was the worst since October of 2009. Now, uh in both of these cases, the stock market was

[02:48] actually already on the way to uh recovery. The market bottomed out in around February of 2009 and obviously March of 2020 and April 3rd of 2020 if which you know, we heavily bought the dip back then on. But uh you know, what

[03:05] this happening? Well, apparently this is happening because employment was cut as firms sought to offset the rising cost of energy and raw material. So basically

[03:17] the inflation that we're seeing coming out of the Middle East is leading to job losses. That's really interesting because here they note, however, despite the recent drop in energy prices and a brighter outlook for shipping, business

[03:30] confidence has fallen, in part reflecting concerns that an end to the war related inventory building could start acting as a drag on sales. All right. Now, there's a lot to unpackage here. So, I'm going to signpost this for

[03:46] a moment. I'm not not calling anybody a noob, but as like 20 years ago, if I heard this stuff, I'd be thinking to myself, man, I don't know what to make out of any of this. Okay? And and I think a pro looks at this and the pro

[04:01] take here is we got to break this down. Like, let's chart out what's actually happening with jobs and why are we seeing inflections and how do we make sense of what's actually happening in the labor market. Uh, and so here's how

[04:14] we do that. We take the ADP, not the government data. We take the ADP weekly government data. We take the ADP weekly data and we chart it and we look at 2025 and the weekly jobs data for 2025 [snorts] sucked. The gray bars represent

[04:30] jobs added. AIPA tariffs died over here in February and you could kind of see a boost in hiring with the death of the AIPA tariffs. Then we had this weird green boom right here. Look at this. March to about May, early June, massive

[04:46] boom in hiring that was really celebrated as oh the employment crisis celebrated as oh the employment crisis is overblown. This is fantastic news. Uh and then if you just look at the right side kind of where that blue slope is,

[04:59] you can actually see a very clear trend line that is now declining with the data just out 2 days ago indicating 16,500 jobs created works out to about 66,000

[05:11] when we were knocking on the door of 180,000. So what happened here? Like why why are these differences occurring? Well, one of the explanations we could

[05:23] actually see right here. Okay, and this is this is I think how pros like to change over time of the data? Take a look at this. If we go to the April report, which was uh issued two months ago, we could actually see the

[05:38] following. Listen to this line. They literally told us this was going to happen and we covered it on the channel. Chris Williamson, the surge in Chris Williamson, the surge in manufacturing activity in April is not

[05:52] cause for cheer that at first glance it suggests. A key driving force behind the upturn is the need for companies to get ahead of further feared price rises and supply shortages providing a short-term boost

[06:09] to manufacturing that could fade in the coming months as headwinds in the economy continue to build. Okay, so now we've got a little bit of a problem. we've got a little bit of a problem. Okay, so the noob take here is the

[06:23] economy is fine, Kevin. The jobs market is booming. The pain of the jobs market last year was just due to deportations and a little bit of tariff adjusting. That's dead now. The economy is fine. Everything is good. The pro take here is

[06:39] we had a little adrenaline shot to jobs in the first quarter because companies were panicked about the fact that IPA tariffs died. We knew new tariffs were inflation was going to come due to the straight of hormuz. So, a lot of

[06:54] manufacturing companies are like, "Let's hire a bunch of people and make a lot of stuff really freaking fast so we can get ahead and build inventory ahead of all of the price increases." The pro now looks and goes, "Now we're paying the

[07:10] piper. Now those job gains are actually going in reverse. were collapsing on the growth rate of jobs now indicating that we are seeing the largest or weakest

[07:23] employment numbers, largest layoffs, weakest employment numbers going all the way back to May of 2020. And if you cut out the pandemic going all the way back to October of 2009, that is something to pay attention to.

[07:37] That's a problem. So that doesn't mean again sell everything and run for the hills. But let's try to understand what's next. The question is where do we stabilize right? We had AIPA tariffs that died here. We had the straight of

[07:52] Hormuz situation which is now a renewed issue and now we have 301 tariffs. But what we also have now are manufacturers who have really built up their stock piles. So this stockpile building which we can also see right here, this is from

[08:09] the April report again. Gains in production and order books were steepest seen during four years or uh seen for four years and drove a strong rise in purchasing. However, the upturns were commonly linked to stock building as

[08:24] surging raw material prices and supply chain disruptions pushed firms to build inventories amid delays and inflationary pressures. So in other words, firms have pressures. So in other words, firms have now built up a lot of products at least

[08:37] manufacturing firms have. You know, services are doing okay. Services are considered to be stabilizing though growth is historically muted and at the end of the second quarter. So also not great in services, but

[08:52] also not great in services, but manufacturers built up extra supply. And even though when this report came out and prices were falling, employers are like, ah, we might not be able to hire as much anymore because we have

[09:05] inventory built up, prices are likely to disinflate now. And we still have really expensive prices for well now oil and now a second straight disruption straight of Hormuz. And then of course the southern choke point of the Red Sea.

[09:22] On top of that, the 10-year Treasury back in this area over here where the jobs market was weak, the 10-year Treasury was 4.25. The 2-year Treasury was 3.25. Now, the 2-year Treasury is 80 basis

[09:38] points higher. The 10-year Treasury is 50 basis points higher. It's literally two or three times already in the Treasury curve. and oil prices are at

[09:50] Treasury curve. and oil prices are at 100 bucks for Brent, which is 67% higher than where they were in January at $60. So, try to put that together for a So, try to put that together for a moment. Over here, you had crappy jobs

[10:03] reports because of tariff uncertainty and immigration. Over here, you had really good jobs reports because companies are like, "Wow, sweet. APA tariffs are dead. Let's take a moment and build as much as we can before we

[10:16] straight of Hormuz pricing that ends up hitting. Where we sit now is we have to eat all of that crap. We now have to eat hormuz red sea high oil prices, high

[10:29] interest rates, and section 301 tariffs, plus whatever new tariffs Donald Trump thinks up because all of a sudden Canada, I guess, lit their wildfire and purposely decided to send some toxic smoke over to America and therefore now

[10:43] smoke over to America and therefore now they deserve tariffs. asking ourselves is where do we stabilize on this trend because so far

[10:56] we can't say oh it looks like there's a floor forming uh because there's not this is our only data set at 16.5. We go back to July 4th. That's where we have back to July 4th. That's where we have the data. Uh then so you know these data

[11:08] points are still to come. I've been drawing over here. Uh and then after we evaluate a floor, but we can't do that yet. And so really only what we can do is try to look at other indicators of potentially uh things starting to falter

[11:24] economically. One of those indicators, unfortunately, is not doing so hot. It is called the Atlanta Fed real GDP now indicator. And we can see that has actually plummeted from estimates in the second quarter for GDP. Uh so real GDP

[11:39] growth is somewhere between 3 to 4%. Those have actually now plummeted uh down here at the beginning of July to about 1.7%. Now these are real GDP driven by inflation which then of course begs the question of okay fine well if

[11:54] we're you know adjusting GDP down because inflation numbers are high because of gas prices and otherwise well then maybe we should go take a look and see what inflation is doing. So let's go do exactly that. Let's go take a look at

[12:08] the last BLS report. And oh, that's right. This inflation report actually came in below expectations. We actually came in flat on core. But that's not knew what that headline was. What's actually more interesting is why why are

[12:24] these levels coming in low? Well, one of the reasons is financial services where the stock market and aum at banks and institutions is hitting all-time highs. Yet seasonally and nonseasonally adjusted in June, we actually fell on

[12:39] financial services pricing. A little odd maybe because the stock market was a little weaker in June after the uh SpaceX sucking, right? We talked about the SpaceX suck suckening took a lot of liquidity out of the market. Uh another

[12:52] thing that we saw here in addition to personals personal services is right here. We saw uh medical health insurance and car insurance turn negative both on and car insurance turn negative both on the seasonal and nonseasonal lines for

[13:06] June. Uh these columns by the way are non-seasonally adjusted on the left, seasonally adjusted on the right. Uh and these are either negative or barely growing. Pretty low over here. Hospital services, healthcare, health insurance.

[13:18] Look at that. negative health insurance the last 3 months and then that's the non-seasonally adjusted right here. Uh negative.4 negative.1.5. A lot of components of our market that has historically been sending

[13:31] inflationary signals are now sending disinflationary signals. Take a look at this one over here. You've got miscellaneous personal goods negative.6 whatever that has a very low waiting. Look right here. Rent of shelter. This

[13:45] regularly talked about. Oh, it's coming. It's coming. It just came. Rent of shelter only.1 lodging away from home. Uh so hotels basically negative.3 lodging away uh from for these are

[14:01] different you know breakdowns basically. Uh owner's equivalent rent one of the lowest readings that we've seen in years at just 2%. Now we know this is the CP lie. Nobody really believes the CP lie, but the point is it's aligning with

[14:16] but the point is it's aligning with weaker ADP data, weaker ISM data, weaker uh S&P data, right? The manufacturing reports we just looked at. Uh and even though unemployment claims today came in really below expectations and on the

[14:31] lower side it was like 187,000 or something like that, unemployment claims really lag recessions. Unemployment claims generally peak after a recession into a recession when claims are really low and then people like, you know,

[14:47] gosh, I think we're in a recession." Unemployment claims rise because layoffs don't get absorbed anymore. That's the big pivot, right? The moment when when you're in recession, when everybody knows you are, but by then you're really

[15:02] just forming the bottom. Usually, you're halfway through the recession or whatever. And by the time the recession's over in the recovery process again, that's usually when you're seeing this recovery

[15:15] uh in in the economy and the stock market. And so that's how you curve out claims. If you look at a chart of unemployment claims, it's historically lagging. So we don't want to look at lagging information. We're trying to

[15:27] look at leading information. And I mean, like 20 years ago, I'd be that noob that would be like, "Oh, well, you know, if they're reporting on it, well, it's already old news, so what good is it for me?" And as a pro, I think all of us can

[15:44] look at this and go, "Wow, we can think of this together. This is actually a really good point. I mean, they literally told us in April, hey, this is inventory building. This is stockpiling before they get hit with higher prices."

[15:57] And literally what they forecast in April is now coming true. So they actually gave us the leading indicators that this surge right here in April was

[16:09] not going to last. They warned us. They gave us that heads up and we should be thankful for that and that's why we want to pay attention to that. So that's why now when I look at the reports and I see crap, it's happening and it's coming in

[16:24] with data that's the worst since CO or removing COVID back to 2009. something we want to pay attention to. Now, uh I usually don't watch a lot of other YouTube videos, but I was bored on a plane and I listened to a good old

[16:38] George Gam video. Shout out to George. I think he's a great guy, brilliant guy, big fan. Uh and I wrote down some notes on his video. Uh, and so he basically argued that banks may be getting concerned about higher oil prices, which

[16:52] hit $100. I think when he made the video, they were like $85. Uh, and this because the economy sits basically is is crisis. Uh, he argues he argues that

[17:06] Blue Owl, Black Rock, all these are going to collapse. uh and that this is really late credit cycle and we're either going to get a garden variety recession or a great financial crisis. We don't know which. Can't guarantee

[17:20] good for either of those. And then let's just recall that the NASDAQ went down just recall that the NASDAQ went down 80% in 2001. Uh so oil, he says, should not be going up while month-on-month core inflation is going down. So, you

[17:35] keep an eye on this. This is just another leading indicator to keep an eye on. Uh these measurements were made from May to June and there was obviously a lot of ceasefire hope over here. But but realistically that's the reason I looked

[17:49] at some of these components. Owner's equivalent rent, health care, transportation services going negative. These aren't like war related components, right? You'd expect on George Gammon's point that if oil was a

[18:03] straw to that broke the camel camel's back, you know, you you'd expect to see inflation broadly in this report and you're not. You're actually seeing deflation in components. And again, I'm not out here trying to say, "Oh, Kevin,

[18:18] you know, prices aren't going down out there, right?" I know. But there are components where we're seeing less inflation, in some cases disinflation or deflation on a month-over-month basis, which is odd at a time where gas prices

[18:32] are skyrocketing. That's the weird thing. And that's what sort of comes back to this chart over here and goes, "Aha, well maybe it all does have to do with this. As employment starts rolling over, employment growth, companies start

[18:48] member live stream this morning. Remember, you could always join us, watch it back, watch the recording. We did a full analysis on Service Now, for example, and let's just say there's a lot to say about their PP. Uh you could

[19:00] watch that and uh uh and and see what my bottom line takeaway was on that and valuation for the company. But let's let's do a little bottom line here. And trying to offend anybody in the comments with the new vers style. And I know some

[19:15] like this. I feel like you're calling us a noob." No, no, no. I'm trying to just a noob." No, no, no. I'm trying to just broadly say there's a noob take and then there's in my opinion a protake, right? So my opinion is that we all kind of

[19:27] want to look at, you know, the protake kind of makes sense here. You know, we we want that extra nuance and we want that depth. Uh and it's a good way in my opinion to sort of summarize what we've got going on here. So let's try to put

[19:39] got going on here. So let's try to put this together. All right, the noob looks at employment data and says everything is peachy. We have had an explosion in employment from last year. You could see the explosion clear as day in the ADP

[19:55] weekly data. There's nothing to worry about. The economy adjusted to Donald about. The economy adjusted to Donald Trump's layoffs and uh or his immigration, you know, uh deportations and his tariffs and now we're good. But

[20:09] the pro comes in and says, "No, that's not true. We had an explosion in jobs at the beginning of 2026 because companies had a really short window where tariffs

[20:21] died thanks to the Supreme Court's action in February of 2026. And there was a window where we didn't have tariffs for those 301 tariffs to get initiated. And so a lot of manufacturers and businesses pumped up building

[20:34] products and getting goods ready. They built inventory. And that's why we saw this boom in hiring. But that boom unfortunately in hiring is a temporary

[20:46] boom that's driven by the desire to get ahead of new tariffs and the desire to get ahead of straight of hormuz and oil and funding or lending price pressures.

[20:59] All of that is now behind us which is bad. And that's probably why we're seeing the labor market start rolling over which is a bad time for it to start doing that. We're starting to see inflation data actually come in

[21:13] surprisingly negative. While at the same time, oil prices just broke $100 on time, oil prices just broke $100 on Brent. Those are not signs of a strong economy. Those are signs of a weakening economy. So hopefully that was useful.

[21:28] That's the goal is just to kind of consolidate that. Let me know what you this data. But boy, we got something to pay attention to. Thanks so much for Goodbye and good luck. Why not advertise [music] these things that you told us

[21:40] about this. >> We'll we'll try a little advertising and done so much. People love you. People look up to you. >> Kevin Pra there, financial analyst and YouTuber. Meet Kevin. Always great to

[21:52] YouTuber. Meet Kevin. Always great to get your take.