Economy
The August jobs report was released Friday, and even with low expectations, it was a disappointment on par with the Chiefs game last night. For starters, we only added 22,000 new jobs in August. For reference, in 2024 we averaged 168,000 new jobs per month. The revision to July's numbers were even worse, showing that we actually lost 13,000 jobs (previously reported as a gain on 147,000). Excluding the pandemic era, the last time we saw a month where we lost jobs was back in 2010 when we were clawing our way out of the Great Financial Crisis. The slowdown in the labor market is undeniable, and now the question becomes not only if the Fed will cut rates this month, but by how much. According to the CME's FedWatch Tool, last week there was a 13% chance of no rate cuts at the September 17 FOMC meeting. Now there's about that much chance of 2 cuts at the same meeting. Mortgage rates fell in response to the jobs numbers seeing the largest one day drop in over a year, according to the WSJ.
Next week we'll see what inflation looked like for August when we see the Consumer Price Index report from the Bureau of Labor Statistics. It's the last significant piece of economic data we'll get before the Fed makes a decision on what to do with interest rates.
Markets
The S&P 500 rose by 0.33% this week, showing little change in response to the jobs numbers. Interestingly, the market opened higher Friday morning after the data was released, briefly hitting a new intra-day high. The market was seemingly looking past the lack of job growth towards interest rate cuts that could boost corporate profits and economic activity. Small cap stocks rose even more this week, as they've been hit harder by the rise in interest rates over the past few years. The macroeconomic narrative appears to be in control of the direction of the financial markets for now. The good news: we appear to be set for rate cuts coming soon. The bad news: the economy appears to be weakening, in need of a shot of adrenaline.
What We're Reading
- Annibale Carracci’s ‘Hercules at the Crossroads’: A Vividly Painted Parable - WSJ
- Are We at Bubble-Level Valuations?- Ben Carlson
Have a great weekend.
Dogwood Wealth Management