According to the latest employment update from the US Labor Department, private payrolls in the US expanded at an unexpectedly slow rate in August. Companies added just 140,000 jobs last month, significantly lower than the anticipated increase of over 200,000. This underwhelming performance raises fresh concerns about the strength of economic growth and could influence the Federal Reserve’s decisions regarding interest rate hikes.
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The tactical asset allocation model detailed in Meb Faber’s popular paper—recognized as the most downloaded document on SSRN.com—shifted entirely to cash at the end of last month, as reported by Bloomberg earlier this week. This risk-off strategy has drawn significant attention, owing to the paper’s prominence and influence since its initial release in 2006, titled “A Quantitative Approach to Tactical Asset Allocation.”
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● US jobless claims rise, yet remain near historically low levels
● ISM: US services sector growth continues at a solid pace, albeit slower than before in August
● PMI: growth in US services reaches a three-month high this August
● Job cuts in the US fell sharply last month
● US consumer comfort index slipped last week
● PMI: Eurozone retail sales growth eased in August
● European Central Bank lowers its growth forecast
In tomorrow’s August report from the Labor Department, private nonfarm payrolls in the US are expected to increase by 201,000 (seasonally adjusted), based on The Capital Spectator’s average forecast derived from several econometric estimates. This projection indicates a slight decrease in growth compared to July’s gain of 210,000.
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The US services sector demonstrated significant growth in August, countering fears about a weakening macroeconomic trend. The ISM Non-Manufacturing Index, while slightly down from an all-time high reached in July, still reflects a healthy level of activity. Additionally, Markit’s US Services Purchasing Managers’ Index (PMI) was upwardly revised from its initial estimate, reaching its highest level in three months and signaling strong growth.
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Last week, initial unemployment claims rose by 12,000 to a seasonally adjusted total of 282,000, as reported by the US Labor Department. This increase exceeds Econoday.com’s consensus forecast, which anticipated a modest rise to 273,000. However, when considering the overall trend, the outlook remains positive. The four-week average for jobless claims remains near levels not observed since the early 1970s, and the yearly comparison indicates continued labor market expansion. Today’s figures further bolster expectations for a favorable employment report tomorrow.
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The recent fluctuations in global financial markets have raised concerns about economic growth and the potential for a Federal Reserve rate increase this month. Yet, the stability observed in key Treasury yields lately suggests the bond market may be recalibrating its view, moving away from the dire predictions that seemed imminent during last week’s turmoil. Should tomorrow’s employment figures for August fail to meet expectations for solid growth, the current sentiment may shift swiftly. Conversely, the rise in US yields this week indicates that reports of lost optimism may have been overstated.
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● ADP: A moderate increase in US private employment was noted for August
● US factory orders risen owing to improved auto demand in July
● Fed’s Beige Book: US economic expansion remains steady in July and August
● US mortgage applications surged last week
● Gallup’s US Job Creation Index reached a record high in August
● Eurozone annual rise in real retail sales accelerated to 2.7% in July
● Composite PMI: Eurozone economy deemed “resilient” in August
The ADP Employment Report reveals that US payrolls increased by a moderate 190,000 (seasonally adjusted) in August. This respectable gain is slightly below the consensus forecast of 210,000 from Econoday.com. However, this rise signals a gradual easing in year-over-year growth. Nonetheless, this figure should alleviate immediate fears of an impending recession for the US economy.
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The recent fluctuations in financial and commodity markets have cast a gloomy outlook for the near term. Unsurprisingly, the severity and rapidity of the downturn has led many forward-looking, models-based indicators to signal potential troubles ahead—a prolonged bear market in stocks and even a possible economic recession in the US and beyond. However, despite these concerns, the overarching macroeconomic trend for the US appears to be favorable. Although there is speculation that the economic data may lag and worse conditions lie ahead, this perspective is largely speculative at this juncture.
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