Author: David I. Templeton, CFA, Principal and Portfolio Manager
Week Ending September 5th - Jobs in Focus
This past week consisted of four trading days with the U.S. market closed Monday in recognition of the Labor Day holiday. Although it was a short trading week, the S&P 500 Index was up .33% and reached an intraday record high along with the Nasdaq and Dow Jones Industrial Average indices. A part of what influenced the price action Wednesday was the release of the Job Openings and Labor Turnover Survey (JOLTS) by the U.S. Bureau of Labor Statistics. The report showed job openings declined to 7.18 million and is now lower than the number of individuals that are unemployed at 7.4 million. The consensus expectations for the number of job openings were 7.37 million.
On Thursday weekly initial claims for unemployment were higher than expected at 237 thousand individuals. And then on Friday, August nonfarm payrolls were reported at just 22,000 versus expectations of 76,500, The last three nonfarm payroll reports have been weak.
This weak job market data gives the Federal Reserve support to lower the Fed Funds rate, with the market anticipating a 25-basis point reduction. However, the weaker employment data has increased the odds of a 50-basis point cut, but this magnitude of a reduction stands at only 8% based on the fed Funds future market. Lower rates would likely serve as a tailwind for equities
Lastly, the market is heading into a period that has historically been weak. As the below chart shows, the month of September has begun to show weakness around this time of the month based on the 5- and 10-year average of its returns. A bit of choppiness between now and the end of the month might be something investors could expect. Any weakness might provide a favorable backdrop for a decent fourth quarter rebound.
The Week Ahead
- Consumer Credit (9/8)
- Producer Price Index (PPI), Wholesale Inventories (9/10)
- Consumer Price Index (CPI), weekly initial jobless claims (9/11)
- Michigan Consumer Sentiment (9/12)
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