Below is a chart and brief excerpt from today's Early Look written by Senior Macro analyst Darius Dale.
We suspect the middle-end (discretionary purchases) to slow in the coming months as well, as [unfortunately] more households see a reduction in income from increased furloughs, layoffs, and crashing stock prices.
Regarding the risk to the latter cohort’s purchasing power, it’s worth noting that non-wage income (read: capital gains, etc.) accounts for over half of total pre-tax income for the top-10% of US households by percentile of net worth.
Regarding the health of the US labor market, Yesterday’s ADP Employment Report contained [relatively] little evidence of the ongoing sharp reduction in total employment – just as Friday’s MAR Jobs Report will (NFP survey period only captures data through the 12th of the month). That being said, we can clean evidence from the Small Business (1-49 employees) survey within the ADP report, a cohort that shed -90k jobs in MAR. That’s the worst print since APR ’09.
My heart goes out to each one of the families affected by this morning’s +5,823,900 non-seasonally adjusted increase in Initial Jobless Claims, which I find to more real statistic than the seasonally adjusted headline print of +6.648 million.
I suspect it’s about to get more real for a lot of investors who think the worst economic collapse and associated balance sheet repair cycle quite possibly ever got resolved in business school valuation “priced in” terms in a ~month.