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A Macro View - August Monthly Recap
Chart of the Week
- The US economy added 130,000 new jobs in August, but fell well short of expectations of 170,000. The gain in new jobs was somewhat weaker than the headline number, as nearly one-quarter of the gains were tied to federal hiring for the upcoming 2020 Census. Employment gains in June and July were revised downward by a combined 20,000 as well. The unemployment rate stayed steady at 3.70%, while average hourly earnings were up 0.40% for the month and 3.20% for the trailing 12 months. The weaker-than-expected report likely keeps the Federal Reserve on track to cut short-term interest rates by 25 basis points at its meeting later this month. However, the report was unlikely to be weak enough to encourage a 50-basis-point cut sought by some market participants.
- The ISM Manufacturing Index fell an unexpected 2.10% to 49.10% in August, indicating a contraction in manufacturing activity for the first time since late 2016. New orders fell 3.60% from the previous month, with only three of the 18 manufacturing industries showing gains in new orders. The index has fallen nearly 10 points since the trade war began last summer. The ISM Non-Manufacturing Index, made up of companies such as retailers and restaurants, was up 2.70%, coming off a three-year low in July. Of the 17 industries tracked by the index, 16 of them expanded their businesses, but the rate of new hires and expansion of hours worked increased at the slowest pace in more than two years.
- US equities traded broadly higher this week, with the indices up between 1% and 2%. Non-US equities also rose, with the regional indices up 1.5%-2.0%.
- The Yield on the 10-Year US Treasury Note drifted higher in the holiday-shortened week. The 3-month / 10-year Treasury curve remains inverted, with the Treasury bill yield roughly 40 basis points higher.
- The US dollar finished weaker against a basket of currencies, reflecting both rising expectations of a Fed rate cut later this month and renewed optimism over trade talks with China.
- Gold was down slightly on the week after rallying more than 2% through mid-day Wednesday.
- Oil prices were up slightly from their preholiday close. A sharp rally on Wednesday erased Tuesday’s losses. Prices have been tightly range bound since early August.
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