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Week in Review: July 6, 2021

Recap & Commentary

In a week that was largely devoid of impactful headlines, except for Friday’s employment report, markets (S&P 500) drifted higher, taking the path of least resistance. For the week, the S&P 500 set a new record each day. Friday marked the seventh consecutive day in which the index set a new record, the longest streak since 1997.

Friday’s unexpectedly strong employment report was greeted positively by the markets as it helped assuage some of the concerns about labor shortages hampering numerous industries. Despite the addition of 850K new jobs, the unemployment rate unexpectedly rose from 0.1% to 5.9%. The reason is nonfarm payrolls are not used in the calculation of the unemployment rate. Instead, a different measure, household survey data, is used. While the household and nonfarm payrolls data often move in the same direction, periodically they diverge. June was a good example of this, as the household data showed a loss of 18K jobs. In addition, the civilian labor force increased by 151K. That combination resulted in the 0.1% increase in the unemployment rate.

Oil reached $75/barrel, its first time above that threshold since October 2018. Up 51% during the first half of 2021, many analysts believe that prices could go higher thanks to a rapid surge in demand and relatively disciplined supply increases by producers.

Economic Bullet Points

Nonfarm payrolls added 850K jobs in June, the strongest growth in 10 months and significantly better than the consensus estimate of 700K. Similar to the past several months, leisure and hospitality saw large gains, adding 343K new workers. However, the sector still needs to add an additional 2.2M jobs in order to return to February 2020 levels.

Manufacturing activity, as measured by industry group ISM, slowed in June but remained solid in expansion territory. Notably, employment slowed to 49.9, just below the breakeven level of 50.  Many companies noted that they continue to experience significant difficulty attracting and retaining labor. Reflecting the effects of higher prices stemming from the current disruption to global supply chains and the attendant cost increases, prices paid by manufacturers set a new record high dating back to 1979.

Consumer confidence rose to its highest level in 16 months driven by increases in both the present situation and expectations components. Often viewed as a leading indictor of future spending, the rise in the index bodes well for 3Q21 GDP. Overall, the proportion of respondents planning to purchase homes, vehicles and major appliances all rose.

Bucking the recent slowing trend in housing data, pending home sales jumped 8% in May, the largest increase in 11 months. That came on the heels of a nearly 4.5% decline in April and highlighted the often volatile nature of housing data.

Weekly jobless claims fell from 51K to 364K, a new pandemic low.

Of Note

Americans are very much on the move again. The number of travelers passing through TSA checkpoints reached 2.1M passengers on multiple days this past week, the highest level since March 2020 and nearly triple the number of passengers passing through checkpoints at the same time a year ago.

Market Indices Week of 06/25

S&P 5001.7%
Small Caps-1.2%
Intl. Developed-1.2%
Intl. Emerging-1.8%
Commodities2.8%
U.S. Bond Market0.5%
10-Year Treas. Yield1.42%
US Dollar0.4%
WTI Oil ($/bl)$75
Gold ($/oz)$1,783

The Week Ahead

  • FOMC Meeting Minutes
  • ISM Services
  • Weekly Jobless Claims

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