Week in Review 8.2.2019

July Employment — 164K jobs were added in July, right in-line with the 165K economist expectation and the Federal Reserve’s characterization of the labor market as “strong.” Additionally, the unemployment rate held steady at 3.7%, due to an offsetting increase in labor force participation, and average hourly earnings rose 0.3%, which improved the annualized change to 3.2%. Altogether, the July data suggests that below-target inflation is poised to continue.International Trade — The trade deficit narrowed a scant $0.2B in June, but only because imports fell more than exports, which is not a sustainable path. US trade is drying up with exports down roughly -$7B and imports down -$5.3B from 2018 highs.

US Manufacturing activity continued to weaken in July according to figures from several major data providers. This trend is likely to persist amid slowing global growth and marked trade policy uncertainties.

Personal Income & Outlays — Personal income rose 0.4% in June, matching expectations. However, personal consumption expenditures rose only 0.3%, the slowest pace for the data point in four months. Year-over-year, US real disposable income has risen 3.3%, its slowest pace since November 2017, which could be hinting at a possible softening in consumer spending in coming periods.

Consumer Confidence — At 98.4, consumer sentiment remained elevated in July. Confidence has been resilient in the face of trade uncertainty, but Trump’s late-week announcement declaring that he plans to impose an additional 10% tariff on $300 billion of Chinese goods, effective Sept. 1, could be a concern.

Euro Zone GDP growth slowed to 0.2% in the second quarter, down from 0.4% in the first quarter. The slower growth came despite unemployment falling to an 11-year low of 7.5%.