Tumbling commodity prices are "the canary in the coalmine," proving that the industrial sector is mired in recession and has been so for the past half year, Stephen Schork, editor of “The Schork Report” newsletter, told
Newsmax TV.
"It's not just the price of oil, it's also the price of every industrial commodity and that's the concern here because commodity markets are the canary in the coal mine," he told "Newsmax Now."
"When you get a significant pull back in not just oil prices but in copper, aluminum, lumber, steel, metallurgical coal, this is telling you something about the health of the economy," he explained.
"And what it's telling us is the economy is not strong and we should expect doldrums coming in through 2016. This is finally catching on to the market in a broader sense," he said.
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After tumbling late last year, crude prices have slid another 28 percent this year. Oil and gas producers have begun revisiting their budgets to adjust to worsening market conditions. Iran's return to the oil market this month has added to worries, after the lifting of international sanctions.
Markets could “drown in oversupply,” sending prices even lower as oil demand growth slows and Iran boosts exports, the International Energy Agency said. A "lower-for-even-longer" scenario is forcing companies’ budget planners to trim spending even further.
And he says plunging oil prices "already is having a ripple effect" across the country.
"Right now what we're seeing here is the U.S. industrial sector – and I want to be very clear on this – the U.S. industrial sector is already in recession and we've been in recession for at least the last six months," he said.
"Whether you look at durable goods, capital expenditures, factory orders, the industrial production numbers ... that is telling us that we are clearly in economic doldrums and this is certainly having an impact," he said.
And plunging oil prices will take a toll on the job market.
"So far in 2016, the United States alone has lost over 140,000 in the oil industry and that is a concern because these are jobs that pay twice the average across the board right now. So we are losing a significant amount of jobs in significantly high paying jobs both here in the United States and here in Canada," he said.
"Now, when you extrapolate that up, the loss of jobs, the loss of income, the loss of income tax revenue, sales tax revenue, real estate tax revenue on these communities, it is having and will continue to have a devastating impact in 2016."
Oil prices rebounded more than $1 a barrel from 12-year lows on Thursday, heading for their biggest daily gain this year as rallying financial markets gave some bearish traders reason to take profits on record short positions,
Reuters reported.
U.S. crude vaulted back to $30 as hopes for easier monetary policy from Europe fueled a recovery in European and U.S. stock markets.
Still, few traders expected a quick recovery from this year's 20 percent slump, with oil under pressure from a deepening supply glut and signs of economic weakness in China.
(Newsmax wire services contributed to this report).
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