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A Macro View - Shifting Winds at the Federal Reserve
Chart of the Week
- The Federal Reserve (Fed) cut rates for the first time in more than ten years. On Wednesday, July 31, Fed Chair Jerome Powell and the central bank’s rate-setting committee lowered the target range for the federal funds rate 25 basis points to 2.00-2.25%. The move comes as monetary policymakers have grown increasingly concerned about the durability of the current expansion amid heightened trade tensions.
- Jobless claims are higher than expected, still near historic lows. Initial jobless claims rose to 215,000 for the week ended July 27, while the four-week average fell to 211,500. Both measures remain near their lowest in 50 years. Continuing claims at 1.70 million for the week ended July 20 also are near lows not seen since the 1970s.
- Unemployment is historically low, but wage growth is stalling. The US economy added 164,000 jobs in July, while unemployment remained at 3.70%. However, average hourly earnings growth clocked in at only 3.20% over the 12 months ended in July. This figure is down from the post-crisis high of 3.40% recorded in February 2019 and lower than gains seen in the last economic cycle.
- Global equity markets were led by Japan and Turkey, which posted returns between 19 and 24 basis points through Thursday. India and Argentina, down more than 3.10% and 4.30%, respectively, were the worst performers.
- The Treasury yield curve shifted downward through Thursday. Yields across the curve fell precipitously in response to the Fed’s rate cut.
- Commodities were broadly down on the week. Oil, agriculture, and precious and industrial metals were down on the week.
- The US dollar strengthened against a basket of major trade partners’ currencies. The dollar index remains at highs not seen since 2017.
- In other economic news: The US trade deficit grew in January as exports fell due to ongoing trade tensions. Construction spending fell 1.30% in June in a greater drop than economists had forecast. The Conference Board’s Consumer Confidence Survey approached post-crisis heights in July, as unemployment remains low.
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