Markets Climb as Weak Jobs Data Fuels Rate Cut Expectations

The stock market was heavily influenced last week by new data on the labor market, which continued to show signs of cooling and bolstered expectations of a potential interest rate cut by the Federal Reserve later this month. Throughout last week, Wall Street experienced some significant swings driven by economic data. The week began with a downturn but ended on a positive note, with both the S&P 500 and the NASDAQ hitting new record highs on Friday. Shares of big tech companies were a major factor in the market’s overall movement. Otherwise, the most significant economic news was last Friday’s jobs report, which further highlighted a slowdown in hiring. Ten-year Treasury yields fell sharply by last week’s end, reaching the lowest level in five months, driven by the weakening labor market and a dovish outlook for an interest rate cut.

August Job Growth Slows; Unemployment Rate Rises

Job growth was muted for the second straight month in August after increasing by a mere 22,000. The unemployment rate ticked up 0.1 percentage point to 4.3%. The number of unemployed rose by 148,000 to 7.4 million. The employment-population ratio was unchanged at 59.6%, while the labor force participation rate inched up 0.1 percentage point to 62.3%. The number of long-term unemployed (those jobless for 27 weeks or more) increased by 104,000 to 1.9 million. The change in total employment for June was revised down by 27,000, from +14,000 to -13,000, and the change for July was revised up by 6,000, from +73,000 to +79,000. With these revisions, employment in June and July combined is 21,000 lower than previously reported. Average hourly earnings rose by $0.10, or 0.3%, to $36.53 in August. Over the past 12 months, average hourly earnings have increased by 3.7%. In August, the average workweek was 34.2 hours for the third month in a row.

Eye on the Week Ahead

Inflation data for August is available this week. Attention will focus primarily on the Consumer Price Index, which has risen incrementally but steadily over the past several months. The Producer Price Index is also out this week. Last month, producer prices rose 0.9% in July and 3.3% for the year.