Economic Update 08/10/15

A GREEN LIGHT FOR A RATE HIKE?

According to the latest Labor Department report, employers hired 215,000 new workers in July – 77,000 of them in professional, business, education, and health care occupations. The jobless rate held steady at 5.3% while the U-6 rate (unemployment + underemployment) ticked down to 10.4%. Monthly hiring totals have averaged 235,000 since May compared to 195,000 in Q1, and even with continued lackluster wage growth, some analysts see a stronger argument for the Federal Reserve to adjust short-term interest rates next month.

PERSONAL SPENDING IMPROVED 0.2% IN JUNE

This minor gain followed the 0.7% increase measured by the Commerce Department for May. Personal wages, however, rose 0.4% in June. A consensus MarketWatch forecast had both indicators advancing 0.3%.

ISM SERVICE SECTOR PMI REACHES HISTORIC PEAK

With 15 of 18 service fields reporting growth, the Institute for Supply Management’s non-manufacturing PMI rose 4.3 points to reach 60.3 in July, the highest mark in its 7-year history. ISM’s factory PMI lost 0.8 points in July, slipping to 52.7. Better news emerged from the manufacturing sector, however: the Commerce Department noted a 1.8% gain for factory orders in June.

A DOWN WEEK FOR STOCKS

The July employment report did little to ease concerns that the Fed might raise interest rates in September. That factor and some earnings disappointments sent the major indices south last week. Across August 3-7, the DJIA lost 1.79% to fall to 17,373.38. The S&P 500 slipped 1.25% in that time span to settle at 2,077.57 while the Nasdaq fell 1.65% to 5,043.54. Oil’s grim summer continued as futures lost 6.33% on the NYMEX for the week on the way to a Friday close of $43.81. Gold declined 0.28% for the week, settling Friday at $1,091.80 on the COMEX.

THIS WEEK: Dean Foods, Live Nation, Shake Shack, and Take-Two Interactive report earnings Monday. Tuesday, the Street eyes Q2 results from Fossil, Red Robin, and Symantec. On Wednesday, earnings arrive from News Corp., Alibaba, Aramark, Cisco, and Macy’s. Thursday, July retail sales figures and a new initial jobless claims report complement earnings from Advance Auto Parts, Applied Materials, Dillard’s, El Pollo Loco, Kohl’s, Nordstrom, and Tribune Media. The initial August University of Michigan consumer sentiment index and the July Producer Price Index appear Friday, along with a report on July industrial output, and Q2 results from JCPenney.