August Numbers Set to Roll-In This Week

Sep 03, 2019
An Empty Beach

August Economic Results Roll-In This Week

One might think the holiday-shortened week would provide us some slack to adjust to the post-summer blues but, alas, no such luck. This abbreviated week is full of first-tier economic releases headlined by the August jobs report on Friday and plenty of Fed speak. As for jobs, the recent trend of 150,000-ish job gains is expected to continue in August while the ISM reports will give us a look at the manufacturing and services sectors. Both are expected to print in the low 50’s which reflects continued expansion but slowing momentum. Thus, early August reads seem set to portray a domestic economy that continues to have moderate strength but with  a slowing trend evident.  Away from the economic numbers, six Fed speakers will be providing their latest economic views with the spotlight on Chair Powell in Zurich on Friday where he’ll give his latest economic outlook.


Treasuries
Treasury Curve Today Week Change
3 Month 1.97% -0.02%
6 Month 1.87% -0.01%
1 Year 1.75% +0.02%
2 Year 1.50% -0.02%
3 Year 1.42% -0.03%
5 Year 1.38% -0.04%
10 Year 1.49% -0.05%
30 Year 1.96% -0.07%
Short-Term Rates
Fed Funds 2.25%
Prime Rate 5.25%
3 Mo LIBOR 2.14%
6 Mo LIBOR 2.04%
12 Mo LIBOR 1.97%
Swap Rates
3 Year 1.385%
5 Year 1.311%
10 Year 1.370%
Economic Calendar
Date Statistic For Briefing Forecast Market Expects Prior
Sep 3 ISM Manufacturing Index Aug 51.2 51.3 51.2
Sep 4 Trade Balance Jul -$54.3b -$53.4b -$55.2b
Sep 4 Fed's Beige Book Aug NA NA NA
Sep 5 ADP Employment Change Aug 150k 149k 156k
Sep 5 ISM Non-Manufacturing Index Aug 54.0 54.0 53.7
Sep 6 Change in Nonfarm Payrolls Aug 168k 160k 164k
Sep 6 Unemployment Rate Aug 3.7% 3.7% 3.7%
Sep 6 Average Hourly Earnings (MoM) Aug 0.3% 0.3% 0.3%
Sep 6 Average Hourly Earnings (YoY) Aug 3.0% 3.0% 3.2%

calendar icon Top 5 Events for the Week

Sep. 3 - 6, 2019

1.  Trade-Related News & Fed Speak – All Week
2.  August Employment Report – Friday        
3.  August ISM Manufacturing Index – Tuesday    
4.  August ISM Non-Manufacturing Index – Thursday
5.  July Trade Balance – Wednesday

 

1.  Trade-Related News & Fed Speak – All Week

We’re always just one tweet away from significant volatility in markets, but since the tweet storm just prior to the G-7 meetings the tone on trade has been more constructive. That change created a renewed risk-on mood last week despite the Fed remaining a Twitter punching bag. The mercurial nature of the tweeting is probably one reason Treasury yields haven’t retreated more than might be expected. But then again, while the tweet-tone is more trade-friendly nothing of substance has really happened on that front. Meanwhile, the week brings six Fed speakers headlined by Chair Powell on Friday in Zurich where he’ll give his latest view on the economy. Given that the consumer seems blissfully unfazed by the swirling issues confronting global markets, Powell is likely to express continued confidence in the domestic economy while noting caution over the numerous global headwinds and uncertainties that could slow the U.S. economy at some point in the future.

 

 

2.  August Employment Report – Friday

While retail sales and personal spending for July were both strong indicating the consumer continues to spend despite the sometimes volatile headlines, the August jobs report on Friday will give us a wider view on the domestic economy. The headline number is expected to print a 160k gain versus 164k in July.  The unemployment rate is expected to stay at 3.7% for a third straight month and up slightly from the 3.6% cycle low. Wage gains are expected to remain at 0.3% for a fourth straight month. YoY wage gains, however, are expected to slip from 3.2% to 3.0% after staying above 3.0% since September 2018. The expected two-tenths slippage is caused by two things: moderation in monthly wage gains seen earlier this year and the rolling off of outsized 0.4% monthly gains last year. In summary, if the report comes as expected it will show a labor market that seems to have moderated to a slightly lower level of job creation and YoY wage gains but not enough to stoke immediate slowing concerns.

 

 

3.  August ISM Manufacturing Index – Tuesday

Along with this week’s jobs report the ISM Manufacturing Index will give us another early tell on August activity with the report due later this morning.  The forecast is for an unchanged reading from July at 51.3. Despite the expected unchanged reading, it will pale in comparison to the 12-month average of 55.4 and speaks to the damage done by trade uncertainties and the global slowdown. The 50-level represents the dividing line between an expanding and contracting sector and it is still expected to remain in expansion mode, albeit just barely.

 

 

4.  August ISM Non-Manufacturing Index – Thursday

The ISM Non-Manufacturing Index on Thursday follows the ISM Manufacturing that has been flirting with the dividing line between a contracting and expanding sector. The services sector, however, constitutes nearly 90% of the economy and it’s not expected to be close to contraction territory. That index is expected to show continued strength with a 54.0 print forecast versus 53.7 in July. The index has averaged 57.6 over the past year so an expected modest decrease from the yearly average but still well above the 50 dividing line indicating more health in the services sector versus manufacturing.  The trend as shown above, however, does warrant attention.

ISM Manufacturing and Non-Manufacturing

 

 

5.  July Trade Balance – Wednesday

The monthly trade balance reports carry a little more weight now that the results are subject to a presidential tweet. For July, the trade balance (which accounts for goods and services) is expected to narrow slightly to -$53.4 billion versus -$55.2 billion in June. The trade deficit has ranged from a  twelve-month wide of -$60.8 billion in December as companies tried to front-run new tariffs, to a narrow -$50.0 billion in February as the front-running ran its course. The deficit was -$50.0 billion a year ago, so despite all the trade-related headlines and tariffs, the deficit is expected to remain wider today versus where it was a year ago. That speaks to dollar strength and economic disparities between trading partners being stronger factors in trade than tariffs.

 

 

 


bar graph icon  Investment Yield Ranges Over Last Year

 

US TreasuriesFHLB Agency BulletsMortgage Backed SecuritiesMunicipalsUS Corporate - FinancialsUS Agency Swap Rates 

Source: Bloomberg

 


 

Tom Fitzgerald Signature 

Thomas R. Fitzgerald

Director, Strategy & Research

Tfitzgerald@centerstatebank.com

 

Download / Print as a PDF