The week in review
- Prelim mfg. PMI fell to 48.0 while the svcs. PMI rose to 55.2
- Revisions removed 818k jobs from payroll employment
The week ahead
- 2Q GDP (second estimate)
- PCE
Thought of the Week
Initial jobless claims have risen in recent months, averaging 236k since early June versus 213k in the first five months of 2024. Claims were volatile in July and, on two occasions, spiked to their highest levels since last August. This, in tandem with a weaker Jobs report, stoked fears of a rapidly cooling labor market. Interestingly, a deeper dive into state-level data suggests that two states are largely to blame for the swings in claims: Texas and Michigan.
In these states, three of the last six weeks have shown week-to-week changes in initial claims that surpass one standard deviation in magnitude based on data back to 1988. In Michigan, larger temporary auto plant closures in July likely pressured more individuals to file for unemployment. In Texas, storm-related issues forced individuals out of work as the jump in claims coincided with Hurricane Beryl’s landfall in the state. These spikes proved temporary, however, and claims in both states have retraced lower. For the week ended August 17, initial claims settled at 232k, higher than prints earlier this year but below the average 244k reported in the five years before the pandemic. While weekly prints may be volatile, long-term investors should focus on longer-term trends, which show a labor market that is slowing, but not one that is rapidly deteriorating.
Beyond claims, BLS revisions released last week removed 818k jobs from payroll employment in March 2024. This suggests the labor market was weaker than reported in 2023, but also that strong productivity gains should be revised upward. In his speech at Jackson Hole, Chair Powell expressed more confidence in the disinflation process and noted the FOMC does “not seek or welcome” further cooling in the labor market. This cements a first rate cut in September, creating a sense of urgency for investors to lock in attractive yields before they move lower.
Chart of the Week: Source: Department of Labor, Haver Analytics, J.P. Morgan Asset Management. Change in aggregated state-level initial claims may not equal the change in reported initial claims due to seasonal adjustments being applied to state-level data.
Thought of the week: Source: BLS, Department of Labor, HaverAnalytics, J.P. Morgan Asset Management.
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Originally Posted August 26, 2024 – Weekly Market Recap
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