Why Employment Numbers Won’t Kill The Tech Sector

Nonfarm payroll totaled a seasonally adjusted 73,000 for the month, below even the meager Dow Jones estimate for a gain of 100,000.

Employment numbers are weakening fast, but this doesn’t really mean much for tech stocks.

Why?

Tech companies ($COMPQ) have been cutting American staff left and right and shipping the bulk of these jobs overseas to cut costs.

I hate to say it, but tech firms believe that American workers are too expensive.

Earlier this year, the state of the H-1B visa, which grants foreigners working in the United States, became a controversial topic.

Many economists believe it is a way for tech firms not to pay Americans.

As tech firms latch on to this AI hope, they are busy cutting everything they can under the sun.

This has resulted in around 600,000 Americans being laid off from Silicon Valley jobs.

These were well-paid white collar jobs.

Transferring these jobs overseas has made tech firms less competitive long-term, but it appears as if tech companies are going for broke with the AI development.

The weak report, including the dramatic revisions, could provide incentive for the Federal Reserve to lower interest rates when it next meets in September. Following the report, future traders raised the odds of a cut at the meeting to 75.5%, up from 40%.

A more encompassing unemployment indicator that includes discouraged workers and those holding part-time positions for economic reasons rose to 7.9%, its highest since March.

In addition, long-term unemployment heated up. Average weeks unemployed jumped to 24.1, the highest level since April 2022, while the level of those out of work for more than 27 weeks to 1.82 million, the most since December 2021 and about one-quarter of all the unemployed.

The Fed on Wednesday again voted to hold its key borrowing level in place, where it has been since December, despite blistering criticism from the president.

Though there are concerns about where the labor market is headed, top-line economic numbers are still holding up.

Gross domestic product increased at a 3% annualized pace in the second quarter, considerably better than expected.

In my view, the wider economy is suffering and being held up by around 10 tech companies that are outsourcing staff abroad.

In the short-term, the stock market goes higher, and stocks like Microsoft (MSFT) and Nvidia (NVDA) beat on earnings.

However, these top 10 companies, along with the rest of the tech sector, are destroying their ability to compete in the long term.

At some point, gutting the value of staff comes back to haunt companies.

We are still years away from one man being able to manage a trillion-dollar company with a bunch of algorithms.

I expect employment numbers to continue to crater, while at the same time, the concentration in tech stocks to get even narrower.

We are really reaching Himalayan highs, but we are starting to see how the tech narrative could crack.

Week to week, we are still in the buy the dip territory, but risks are building quickly and asymmetrically as long-term discouraged worker volume skyrockets.