The U.S. Economy Created 528,000 Jobs in July… The U.S. Bureau of Labor Statistics reported that the economy created twice as many jobs as expected last month and that the unemployment rate dropped to the lowest level since the 1960s.
What it means— Investors hated the news, because it gives the Fed the green light to keep raising rates. Stocks and bonds sold off hard at the open, although it will be interesting to see where they finish. But let’s not take this report at face value. Yes, we showed more than 500,000 jobs added, but our old friend the birth-death adjustment added 300,000. More importantly, the big jobs number comes from the establishment survey of only businesses with more than 1,000 employees that counts only surveys that are returned. Some of the pandemic hardest hit employers are having less turnover and improved hiring.
The much more robust household survey showed just 179,000 jobs created last month, with almost no growth since March. The reality likely is somewhere in between with employment only back to 2017 levels.. We’ve got a lot of time between now and the next Fed meeting for new data to sway the views of the central bankers. Buckle up, it should be volatile. In a related note, jobless claims barely inched higher last week, up 6,000 to 260,000, which doesn’t suggest soaring unemployment in the weeks ahead.
July ISM Manufacturing Index Fell From 53% to 52.8%, While ISM Services Index Rose from 55.3% to 56.7%… The services index showed unexpected resilience across the U.S. economy.
What it means— Consumers continued to pivot from buying stuff to paying for experiences last month, as the manufacturing index dropped to the lowest level since the summer of 2020 and the services index reached a three-month high. The services-index jump to 56.7% shows that Americans still crave experiences, even as they shell out more for gas, food, and hotel rooms this year.
While big companies such as Alphabet and Meta Platforms are demanding that their employees handle more business with fewer hires, hospitality firms still can’t find enough people to fill key positions. It’s not exactly a tale of two economies. Nominal growth remains strong. Still, we’re definitely slowing down from the breakneck economic pace of the last two years. It will be interesting to see what happens in both retail goods and travel during the holiday season.
With consumer spending two-thirds of the economy, consumer confidence is slipping. Inflation is putting pressure on household patterns which have shifted from goods to services. Homebuilders are cutting guidance along with Walmart and concerns at Amazon with lower e-commerce activity. GM & Ford stocks are advancing as supply chain problems ease.
Nancy Pelosi Visits Taiwan, Fails to Spark WWIII…The Speaker of the House visited the contested island nation for an as-yet unknown reason.
What it means— The Taiwanese don’t get too many visits from high-ranking American politicians, which was evident as they struggled to figure out where Speaker Pelosi should stand during their press appearances. Ms. Pelosi didn’t outline any new strategy or discuss new initiatives, so it’s not clear what she accomplished other than antagonizing the mainland Chinese government. No military or travel mishaps happened during the event. Investors breathed a sigh of relief when Pelosi left the island.
Homeowner Vacancy Rate at 0.8% in Second Quarter, Rental Vacancy Rate at 5.6%, Both Barely Lower… The numbers were not statistically different from the first quarter but are a continuation of the very low vacancy rates experienced over the last decade.
What it means— This is the part of the housing market that seems to escape people’s notice. When the Great Financial Crisis hit, the homeowner vacancy rate stood at 3% and the rental vacancy rate stood at 10%. We were overloaded with properties for sale in both markets, and buyers were relying on cheap financing and questionable lending standards to make purchases. That’s not the case today. Even as the real estate market cools, we’re still short millions of homes. Young professionals might choose to “bunk up” with roommates in the face of higher rents for a while, but eventually something’s got to give. We need more space to grow.
Retailers Are Locking Down Spam… Retailer Duane Reade in the Port Authority of New York now puts cans of Spam under protective glass. The store wants to counter the scourge of petty larceny, which is up 52% this year in the precinct where the Port Authority is located. While $3.99 Spam and $1.89 StarKist Tuna are under lock and key, nearby Amy’s Soup, which sells for $5.49, doesn’t get the same treatment. Apparently, the thieves have standards.
Data supplied by HS Dent Research
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