Last Wednesday, the Federal Reserve Open Market Committee announced that it would keep interest rates unchanged. It was the correct decision at the time, but two days later, new data was released that greatly increases the odds of a rate cut at the next FOMC meeting in mid September.
It was the July jobs report, released Friday morning, that was the shocker. Not only did our economy add only 73,000 net new jobs in July, but May and June numbers were revised downward by 258,000, with May now showing only 19,000 jobs, and June with 14,000. The unemployment rate rose from 4.1% to 4.2%.
As Bloomberg pointed out, “Without health care [hirings], the last three months of payroll gains look like this: -53,000 in May, -45,000 in June and -300 in July.” As our population ages, the health care sector is almost always growing. Apparently over the past three months, it is the primary sector that’s growing. In the wake of the jobs report, the president fired the head of the Bureau of Labor Statistics.
American companies are beginning to warn that they will not be able to eat the tariffs forever. Procter & Gamble and Walmart have announced coming price hikes, and they will not be alone.
Some tariffs were postponed again, just for a week, until this coming Thursday. Meanwhile, the stock markets finally looked at the tariff and jobs news and slid for the week. Stocks have been riding a wave since April, and a little consolidation isn’t bad, but we’re watching closely.
And we’re beginning to see problems on both sides of the Fed’s dual mandate of stable prices and full employment. Prices rising causes inflation, while job growth sliding may cause an economic slowdown. Sadly, the remedies for these two problems are opposite one another. Inflation is tamed with rising interest rates, while economic slowdown is boosted by lower interest rates. When both happen at the same time, some call it stagflation, and it’s not easy to correct.
The Fed’s preferred measure of inflation is the Core PCE (Personal Consumption Expenditures Index), which came in slightly hotter than expected at 2.8% versus 2.7% expected.
Also contributing to inflation are housing prices, which keep hitting record highs. But condos are another story. Insurance costs are rising, causing homeowner-association dues to rise as well. In order to make condo sales, sellers are lowering prices and still having trouble finding buyers. According to the Wall Street Journal, this is the “softest condo market since 2012.”
NOT contributing to inflation are oil and gasoline prices. The OPEC+ countries have agreed to raise oil production by 547,000 barrels per day beginning next month. More oil means lower prices. It appears that the Saudi-led coalition is responding in part to President Trump’s exhortation to produce more oil, which will hurt Russia.
A baby boy who arrived in Ohio on July 26th was born from an embryo created and frozen in 1994. Does that make him one week old, or 31 years?
For the week ending on August 1st, the Standard & Poor’s 500 finished at 6,238, the Nasdaq Composite Index at 20,650, and the Dow Jones Industrials at 43,588. The ten-year Treasury Note closed lower at 4.220%. U.S. crude oil cost $66.08 per barrel, N/Y. gold cost $3,373.70 per ounce, and one Euro was worth $1.16.
Elizabeth E. Cook
Partner, Diastole Wealth Management
News and information presented here was gathered from sources believed, but not guaranteed, to be reliable, including (but not limited to) Barron’s, The Wall Street Journal, The Bureau of Labor Statistics, Bloomberg, Morning Brew, USA Today, The Economist, Axios, 1440 Digest, The Washington Post, CNBC, CNN, The Associated Press, Euro News, The Guardian, Morning Brief, Yahoo Finance, and Reuters. If you have questions, please call us at 203.458.5220, or reply to this email to reach me, Liz Cook.
Do you drink High Noon? Apparently it’s a canned alcoholic beverage. And recently High Noon announced that its vodka seltzer drink was mistakenly canned in a container labeled for Celsius energy drinks. Not so bad if you expected vodka and got extra energy, but what if the reverse happened?