Kass: The Headwinds Keep Getting Stronger

• Resets: Mortgage resets from the generous teasers of 2003-06 will begin to pressure the incomes of millions of consumers over the next 24 months and will likely exacerbate the oversupply of homes for sale.

• Individual expenditures: Personal consumption is already beginning to weaken: Wal-Mart (WMT Quote), Talbots (TLB Quote), Target (TGT Quote), Circuit City (CC Quote), Sears (SHLD Quote), Home Depot (HD Quote), Office Depot (ODP Quote), the automobile manufacturers and the cellular-phone companies have all recently warned that the future holds diminishing promise.

  Railroad freight, trucking volumes and airline bookings are falling (YRC Worldwide (YRCW Quote), United Parcel Service (UPS Quote), Southwest Airlines (LUV Quote) and JetBlue (JBLU Quote) all disappointed last week), and the Conference Board's Leading Economic Indicators Index fell for the third consecutive month.

• Job growth: Many contend that as long as consumers are employed, they will continue to spend. However, job growth is much worse than it appears in the monthly release from the Bureau of Labor Statistics.

  For example, Friday's April payroll report was inflated by the growth in government jobs and distortions of the "birth/death" assumptions, which added 317,000 phantom jobs last month (in a slowing economy!) on the basis of the assumption that the jobs were produced by small businesses.

  Meanwhile, the household survey (previously mentioned by economic bulls as the more accurate survey) indicates an even weaker picture than the payroll survey -- with no change in household employment over the last five months.

  Moreover, as The High-Tech Strategist recently reported, the April 4.5% unemployment rate moves all the way up to 8.2%, if the government included unemployed workers who haven't looked for work in the past four weeks, part-timers who want and are available for full-time work but can't find jobs and discouraged workers who can't find jobs. (A worsening job market has clearly been evidenced in the emerging weakness over the last month at the major staffing companies: Kelly Services (KELYA Quote), Robert Half (RHI Quote) and Monster Worldwide (MNST Quote), all of which recently warned.)