The U.S. Economy Created 943,000 Jobs in July… Also, the U.S. Bureau of Labor Statistics revised the jobs numbers for May and June higher by a total of 119,000 and the unemployment rate fell from 5.9% to 5.4%.
What it means— Some of the details, like high jobs gains in the service sector and a quarter of a million government jobs added in education, took some of the sparkle off the headlines, but the numbers are still great. Even the labor force participation rate inched up by 0.1%. It’s not a monumental move, but it’s the right direction. The employment numbers show more progress in the recovery, which has been the Fed’s benchmark for dialing back some of their easy money policies. However, the “broad-based and inclusive” employment condition is elusive.
There’s no way to know if the recent gains are enough to start the process, but they will make investors pay more attention to whatever statements come out of the annual Central Bank Symposium later this month at Jackson Hole, WY, on August 26-28.
Factory Orders Rose 1.5% in June… Orders have increased in 13 of the last 14 months.
What it means— The biggest jump was in airplane orders, but that doesn’t mean consumers were on the sidelines. Orders for non-durable goods such as food and clothing increased 2.1%. On the business front, order for capital goods excluding aircraft and military items increased 0.7% in June. With supply chain, labor, and raw material issues plaguing providers at a time of high demand, something has to give. That something is price, which is driving inflation across many categories. The factors hobbling supply should ease over time, but that doesn’t mean prices will drop.
Auto Sales Fall from 15.4 Million Annualized in June to 14.8 Million in July… Sales fell due to supply constraints, which also led to higher pricing and lower incentives.
What it means— Dealer-owned inventory (DOI) dropped to a record-low 22 days, meaning that at the current rate of sales, it would take just 22 days to sell everything on dealers’ lots. The DOI typically oscillates between 50 days and 80 days, depending on the business cycle and time of year.
It soared to more than 120 during the Great Financial Crisis and at the start of the pandemic, only to drop to near 30 as government stimulus and industry relief plans took hold. In a bit of good news, car manufacturers expect the computer chip issue to ease later this year as more supply reaches the market. If you’re shopping for a car, try to hold off until 2022. Buyers of used cars have started to choke on extraordinarily high prices.
Federal Reserve Vice Chair Richard Clarida Said the Central Bank Could Raise Rates in Early 2023… Speaking at the Peterson Institute for International Economics, Clarida gave investors a hint at the timing for higher rates.
What it means— There are two trillion things to consider between now and early 2023. Given that the Fed is buying $120 billion in mortgage-backed and Treasury bonds each month, the central bank is on track to buy $2.04 trillion more over the next 17 months. Fed Chair Powell has said in no uncertain terms that the central bank will end its bond-buying program before it considers raising rates, which must mean that there will be a glide path from buying $120 billion per month today to zero purchases by the end of next year. If that path is to be gentle, the Fed had better get started, and if the central bankers intend to give the markets a lot of lead time, they’d better start communicating, maybe at Jackson Hole in a few weeks.
If the bankers start talking taper, we could see rates melt up instead of rushing higher as happened during the taper tantrum in 2013.
‘Jet Pack Guy’ Returns to L.A. Skies… Several pilots flying into and out of Los Angeles International Airport reported seeing a “man” with a jet pack flying between 3,000 and 5,000 feet in the air within 15 miles of the airport. This is just the latest round of sightings. The air traffic controllers call him Jet Pack Guy, and no one seems to be confusing him with Iron Man. The FBI and the FAA both are investigating.
Data supplied by HS Dent Research
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