September has clearly gotten off to a rough start for Wall Street. Stocks plunged lower on fears of an economic decline and a waning labor market. Investors feared that the Federal Reserve, which is now more likely to drop interest rates by at least 50.0 basis points when it meets in a few weeks, may be responding too late. Tech stocks took a big hit, with the NASDAQ falling nearly 6.0% last week and nearly 12.0% since July 10. Consumer staples, real estate, and utilities were the only market sectors to gain last week. Information technology declined 7.0%, posting the largest loss among the remaining sectors. Crude oil prices have fallen to levels not seen since 2023. Ten-year Treasuries saw their biggest weekly drop in five weeks, having fallen four straight days and seven of the last ten days.
Last Week’s Economic News
- Employment increased by 142,000 in August, in line with recent average monthly job growth, but well below the 12-month average of 202,000. Employment growth was revised down in June (-61,000) and July (-25,000), which rendered a combined decrease of 86,000. In August, the unemployment rate ticked down 0.1 percentage point to 4.2%, while both the labor force participation rate (62.7%) and the employment-population ratio (60.0%) were unchanged from the previous month. The total number of unemployed, at 7.1 million, was essentially unchanged from July. Long-term unemployed (+27 weeks) was little changed at 1.5 million. In August, average hourly earnings increased by $0.14, or 0.4%, to $35.21. Over the past 12 months, average hourly earnings have increased by 3.8%. The average workweek edged up by 0.1 hour to 34.3 hours in August.
- According to the S&P Global US Manufacturing PMI®, manufacturing production decreased for the first time in seven months in August as sales continued to fall due to increasing reports of demand weakness. Slower sales also led to a reduction in employment. The S&P Global US Manufacturing Purchasing Managers’ Index™ posted 47.9 in August, down from 49.6 in July. A reading under the 50.0 mark indicates retraction in manufacturing. The reduction in new orders was the most since June 2023
- Unlike the manufacturing sector, services expanded in August, with business activity expanding at the fastest pace in nearly two-and-a-half years. The S&P Global US Services PMI® Business Activity Index rose to 55.7 last month, up from 55.0 in July. New orders increased as did input costs, which may have contributed to a decrease in employment.
- According to the latest Job Openings and Labor Turnover Summary, on the last business day of July, the number of job openings, at 7.7 million, was about 300,000 below the June figure and was down by 1.1 million over the year. This is the fewest job openings since January 2021. The number of hires in July increased by 273,000 to 5.5 million. The number of total separations rose by 336,000 to 5.4 million. In July, the number of quits was essentially unchanged at 3.3 million but was down by 338,000 over the year.
- For the week ended August 31, there were 227,000 new claims for unemployment insurance, a decrease of 5,000 from the previous week’s level, which was revised up by 1,000. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended August 24 was 1.2%, unchanged from the previous week’s rate.
Eye on the Week Ahead
The latest inflation data is out this week with the releases of the Consumer Price Index and the Producer Price Index. The CPI increased 2.9% over the 12 months ended in June, while the PPI rose 2.2% over the same period.
Have a nice week!
Sincerely,
Robert G. Carpenter