May Jobs Report Analysis: Everyone’s Misreading the Data

Somethings in the Way: Tariffs, Rates, & More

There's an ominous shadow hanging over the U.S. economy, an intangible yet undeniable force slowing growth, dampening spirits, and fostering a mood reminiscent of Nirvana's haunting refrain from "Something in the Way." The barriers erected by tariffs and elevated interest rates aren't just economic—they've led to confusion, doubt, and despair, resonating deeply with the song's lyrics: "Underneath the bridge, tarp has sprung a leak..."

Disconnected Employment

Employment indicators reveal profound structural cracks beneath the surface. Weekly unemployment claims hit their highest level since October 2024, marking a troubling 20% rise since January.

ADP's May employment report revealed just 37,000 new hires, significantly below forecasts, highlighting isolation within the labor market itself. The household survey reported -696,000 fewer full-time positions, a stark illustration of despair that echoes the song's subdued resignation.

Labor Market Desperation

Labor force participation, declining to 62.4%, while Americans increasingly juggle multiple full-time roles merely to survive as people with multiple full time jobs are near record highs—economically exhausted. Job growth disproportionately concentrated in hospitality underscores societal disconnection, with many trapped in unstable, low-wage jobs, embodying Cobain’s bleak reflection of survival.

Despair in Industry

Since President Trump's recent escalation of tariffs—now a punishing 50% on steel and aluminum—the impact has been swift and severe, plunging industries into isolation and economic numbness. Steel prices have fallen -10.5% year-over-year, echoing the desolation in Kurt Cobain's voice. Year-to-date steel output is markedly lower, with Q1 steel revenue down -10% from the prior year. Construction spending contracted month-over-month in April, while steel imports declined -17%, isolating entire sectors from growth opportunities.

Survival Amid Uncertainty

Factory orders declined -3.7%, with durable goods—often reliant on international supply chains—revised sharply downward. Businesses, trapped beneath a "bridge" of tariffs and uncertainty, are delaying orders, unsure whether promised trade deals will materialize or tariffs escalate further.

Economic Withdrawal

In April, the U.S. trade deficit shrank dramatically to $61 billion from $140 billion, not through strength but due to a collapse in imports by -16%. While superficially positive, this contraction signifies deeper isolation. American consumers, increasingly emotionally and financially numb, withdrew from the market, creating a cycle of reduced demand and shrinking economic activity—an isolation mirroring Nirvana’s lyric : "something in the way.”

Valuation Illusions and Market Isolation

Chief market strategist Greg Crennan from Golden Coast Consultants, who accurately forecasted market shifts under Trump's policies, notes further isolation in inflated stock valuations. Despite rebounds from initial tariff shocks, stocks remain dangerously detached from fundamental earnings, much like Cobain's lyrical depiction of isolation beneath the bridge. The S&P PE ratio is actually higher today than before the tariffs were implemented, hovering around 29 today.

The Shiller PE ratio which is cyclically adjusted is even higher, coming in at 37!

Price-to-earnings (P/E) ratios matter because they reflect how much investors are paying for a company’s earnings. When a stock is extremely overvalued—as was the case with Tesla—any hint of negative news, whether factual or speculative, can trigger massive sell-offs. Tesla’s sharp drop yesterday, sparked by a public feud, wasn’t just about headlines—it was about the fragile foundation of a stock priced for perfection. When expectations are sky-high, even minor tremors can lead to historic collapses. (written about Tesla here )

Escaping Economic Despair

Investors are encouraged to break free from economic isolation through prudent portfolio adjustments. Gold, recommended since January ( Take the Gold report ), has surged nearly 30% year-to-date over $3,400 an ounce, offering refuge from uncertainty. Silver remains attractively priced below its historic highs but hitting a 10 year high of $36 up 22% YTD, providing an avenue to escape economic despair driven by currency devaluation and deficit spending.

Strategy for Survival Going Forward