Market Matters
This week we saw plenty of Fed speakers continue to double down on the hawkish rhetoric after Jackson Hole. The markets appear to be listening as the US 10-year treasury has sold off considerably, with it ending the day on Thursday at 3.25 while it hit 3.29% intraday on Thursday. There is concern with the monthly jobs report that we will see more volatility, just because there is lack of liquidity with traders taking an early weekend with Labor Day weekend coming up and we have a big economic data release. It seems like the 10-year has moved a bit too far too fast, but it wouldn't be shocking if we continue to move higher, so, it is best to be defensive here.
Initial Jobless Claims
Initial Jobless Claims declined by -5k to 232k for the week ended August 27th vs. the prior week's revised 237k (orig. 243k). The 4-week moving average for claims is now at 241.5k, which is down -4k from the prior week. Continuing claims, which lag a week, rose +26k to 1.438mln from a revised 1.412mln. This is now the highest count for continuing claims since April 1st. That said, continuing claims were around 1.7-1.8mln pre-covid, so even if you consider the recent increases, continuing claims are still quite low relative to historical averages. The 4-week moving average for continuing claims is 1.429mln.
ISM Manufacturing
The ISM Manufacturing PMI for August remained flat and recording the same print as in June at 52.8. This is also now the second straight month when the manufacturing PMI is the lowest since June 2020. However, when we dive into the report, new orders increased by +3.3 points to 51.3, production declined -3.1 points to 50.4, the prices index increased +1.2 to 52.5, and the employment index rose to 54.2 from 49.9. According to the ISM, the U.S. manufacturing sectors continued to expand at rates similar to the prior two months. Most of the comments from respondents centered around demand and expressed concern over further softening of the economy.
ADP Employment Report
The ADP Employment Report showed a +132k increase in August, which is well below Friday's estimates from the BLS. However, the ADP has changed their reporting and analysis just recently, and did note that, "Our data suggests a recent shift toward a more conservative pace of hiring, possibly as companies try to decipher the economy's conflicting signals. We could be at an inflection point, from super-charged job gains to something more normal." Within the release, goods-producing sectors were up +23k, while the services side saw +109k. Notably for the services sector, leisure/hospitality added a solid +96k new hires. Small businesses (1-49 employees) added only +25k, while mid-sized businesses (50-499 employees) added +53k and large companies added +54k. ADP described pay increases as 'elevated', but with growth having flattened. The overall annual growth rate was up by +7.6% for job-stayers; however, job changers saw gains of +16.1%.
JOLTS Job Openings
JOLTS Job Openings for July came in at 11.239mln, which is above the market expectations of 10.375mln. June's reading of 10.698mln was revised up to 11.040 mln as well. The main industries that led the increase in job openings in transportation, warehousing, and utilities (+81k), arts, entertainment, and recreation (+53k), federal government (+47k), and state & local government education (+42k). There was a fall in job openings in durable goods manufacturing (-47k). This is not a good sign for the Fed, as a tight labor market is an inflationary factor in the economy.
