Markets Taking New Data in Stride

Jeff Roach (00:02):

Hi, I am Jeffrey Roach, Chief Economist at LPL Financial, and in this addition to the Econ Market Minute, I'll share three key takeaways for investors. First, the labor market is becoming less tight. The unemployment rate in August rose to 3.8%, the highest since February 2022, and a sign that the labor market is loosening. In a separate report the number of job openings fell the lowest since March 2021. Certainly, this is good news for policymakers worried about the tight labor market. Here's some other highlights from the August jobs report. Job gains were fairly broad based. We did have a temporary blip within the trucking industry because of a business closure. The construction job market is humming along, especially with many multi-family residential projects under construction. Now, despite recent job gains in leisure and hospitality, that industry is still below its pre-pandemic level, which means investors should expect continued job growth here in future months.

Jeff Roach (01:07):

Bottom line is this. Given the persistent supply problems in the economy, businesses are able to add headcount, despite tight credit conditions. May take longer than anticipated for businesses to feel the full impact of higher rates. These labor reports give the Fed some leeway to take a pause later this month. Second, we live within a tale of two economies. The goods economy is on a completely different trajectory than the services economy. So, for example, in July, goods prices fell month over month for four out of the last five months. But services prices continue to run much hotter. Although services inflation ticked up in July, the overall inflation trajectory has improved from earlier this year. Inflation in core services, ex housing, rose in July, but it appears to be just a one-off event from higher costs in financial services. Third, markets are taking the data in stride. So what should investors do with this information? Well, we see opportunities. Treasury yields fell from recent highs as investors saw cooling labor market, plus downward revisions to last quarter's, GDP growth. Although somewhat disappointing within the details of the inflation report, the Fed will not likely change its plan to keep rates unchanged at the September meeting. Well, that's all for now. Follow me and the LPL research team on social media and take care.