Equity Markets Closed Down Last Week

Wall Street experienced a notable downturn last week, with each of the benchmark indexes closing sharply in the red. A weaker-than-expected jobs report, rising unemployment claims, disappointing corporate earnings from major tech firms and falling manufacturing data prompted the major selloff last week. Evidence of a slowing economy may prompt the Federal Reserve to cut interest rates in September. There was a huge swing in the market sectors last week, where utilities (4.5%) and real estate (3.9%) turned sharply higher, while information technology (-4.1%), consumer discretionary (-3.8%) and energy (-3.4%) turned sharply lower. Bond prices jumped higher as demand increased, pulling yields lower. Ten-year Treasury yields fell to their lowest level since December 2023. Crude oil prices dropped by more than 3.5%, while gold prices climbed higher.

Employment Slowed in July

Employment slowed in July, according to the latest data from the Bureau of Labor Statistics. Employment rose by only 114,000 last month, well below the 12-month average of 215,000. In July, employment continued to trend up in health care, in construction, and in transportation and warehousing, while information lost jobs. The number of unemployed, at 7.2 million, increased by 352,000 over June’s estimate. The unemployment rate increased for the second straight month in July, ticking up 0.2 percentage points to 4.3%. Both the number of unemployed and the unemployment rate are above the July 2023 estimates, at 5.9 million and 3.5%, respectively. The number of long-term unemployed (those jobless for 27 weeks or more) changed little at 1.5 million in July. This measure is up from 1.2 million a year earlier. The long-term unemployed accounted for 21.6% of all unemployed people in July. The labor force participation rate increased 0.1 percentage points to 62.7%, while the employment-population ratio dipped 0.1 percentage points to 60.0%. The May estimate was revised down by 2,000, from 218,000 to 216,000, and the change for June was revised down by 27,000, from 206,000 to 179,000. With these revisions, employment in May and June combined was 29,000 lower than previously reported. In July, average hourly earnings increased by $0.08, or 0.2%, to $35.07. Over the past 12 months, average hourly earnings have increased by 3.6%.

Eye on the Week Ahead

There isn’t much in terms of economic reports available this week. Of some interest is the S&P Global’s survey of service providers for July. The services sector has shown marked resilience during the period of restrictive economic policy and has steadily expanded.