[B]The first week in August was positive for equities as the markets continued to grind higher, despite mixed signals.[/B] Earnings out of companies continued to be strong, and European data continues to be better than expected. The Friday’s employment picture was disappointing which placed a damper on forward momentum. For the week, the S&P 500 Index climbed 19 points or 1.9%.
[B]
Private sector pay roles gained a disappointing 71 thousand and the June figure was revised lower. [/B]The headline lost 131 thousand and here too downward revisions in prior months. The workweek increased and hourly earnings ticked up. Manufacturing, education and health services grew jobs. Expectations by economists were that the headline number would drop approximately 60 thousand jobs. The service sector lost jobs for the second consecutive month and construction lost jobs. State and local governments lost 48k jobs, while federal government jobs (census) lost 154k. The implications are the report is mixed. On one hand, the overall labor picture, which includes the downward revisions, will excite those that expect the Fed to renew asset purchases to support the economy. The June data was revised down significantly. Payrolls fell 221,000 that month, more than the 125,000 drop previously reported, as only 31,000 jobs were added in the private sector. Taking into account revisions to prior months this year, the U.S. economy added an average of less than 100,000 jobs a month in the first seven months, a level that’s not strong enough to bring unemployment down. The jobless rate, which is calculated using a separate household survey, held steady at 9.5% in July. Economists were expecting it to edge higher to 9.6%. Total government employment fell by 202,000 last month, hurt by the laying off of the census workers and by 48,000 jobs lost in state and local governments, which have significant budget strains. In a sign of the labor market’s continued weakness, Friday’s report showed that 45% of unemployed Americans, or 6.6 million people, were out of work for more than six months in July. The longer someone is without a job, the harder it is to find work.
[B]This has seen the US 2-year yield fall to new record lows[/B], for example. On the other hand, the details were supportive. The larger than expected increase in mfg employment and the longer work week suggests industrial output increased. Income rose and this may help support expectations for a recovery in retail sales.
[B]Also in a surprise, Canadian employment was weaker than expected. [/B]The Canadian job markets has been growing robustly for the past 6 months, and July’s report was the first hiccup. The net change in jobs in Canada was -9.3 thousand compared to the 10.3 thousand that was expected and the 93.2 thousand that was created in the month of June. Additionally, the unemployment rate ticked up to 8% from 7.9% expectations and 7.9% in the month of June.
Analysis provided by Exto Capital