Monthly Economic Update July 2024
Chris Polimeni, MBA presents:?
Monthly Economic Update July 2024
As a financial advisor, I want to share with you some of the key economic developments that occurred in the last month. Here are some of the highlights:?
Mixed June jobs report: US labor market adds 206,000 jobs, unemployment rate rises to 4.1%.
The U.S. labor market added more jobs than expected in June while the unemployment rate unexpectedly rose, reaching its highest level since November 2021. Another sign the job market continues to cool.
Data from the Bureau of Labor Statistics released Friday showed the U.S. economy market added 206,000 nonfarm payroll jobs in June. Slightly more than the 190,000 expected by most economists.
The unemployment rate rose to 4.1%, up from 4% in the month prior. The highest reading in almost three years. June's job additions were a slight decline from May, which saw job gains revised down on Friday to 218,000 from the 272,000 initially reported last month.
On 7/5 Stock futures turned higher following the report, adding to gains after the market traded to record highs earlier this week amid a slew of softer-than-expected economic data, including readings on inflation that have the US pacing back toward a "disinflationary path," according to Federal Reserve Chair Jerome Powell.
Also in Friday's report, wage growth, an important measure for gauging inflation pressures, slowed to 3.9% year-over-year. On a monthly basis, wages increased 0.3%, a decrease from the previous month's 0.4% gain.
Meanwhile, the labor force participation rate picked up to 62.6% from 62.5% the month prior.
The largest job increases in Friday's report were in government employment, which added 70,000 jobs in June. Meanwhile, healthcare employment added 49,000 jobs, lower than the average monthly gain of 64,000 over the last twelve months.
Ahead of Friday's jobs report, investors were pricing in two interest rate cuts this year, with the first most likely to come in September.
According to the CME FedWatch Tool, investors are pricing in a nearly 75% chance the Fed cuts rates in September. Last month, Fed forecasts suggested one rate cut would likely be appropriate this year.
To some, Friday's report further strengthens the case for Federal Reserve interest rate cuts in the near future.
"Today's employment report ought to firm up expectations of a September rate cut," Renaissance Macro's head of economics Neil Dutta wrote in a note to client. "Economic conditions are cooling and that makes the trade-offs different for the Fed...Powell should use July to set up a September cut."
The report follows recent data that has also showed signs of a slowdown in the labor market.
On Wednesday, The ADP Research Institute's National Employment Report showed 150,000 jobs were added to the private sector in June, a deceleration from the 157,000 job additions in May. Meanwhile, data from the Department of Labor showed nearly 1.86 million continuing unemployment claims were filed in the week ending June 29, up from 1.83 million the week prior. This marked the ninth straight week where continuing claims have risen.
With unemployment claims rising and the unemployment rate at its highest level in more than two years while inflation is falling, economists believe the Fed is walking an increasingly fine line by keeping interest rates at their levels in more than two decades.
"Given the cooling evident over the past year in the labor market, we see further labor market weakening as becoming more worrisome and less welcomed by the Fed," Wells Fargo senior economist Sarah House wrote in a note to clients on Tuesday.1
Moreover, if the Fed is too late to cut interest rates, the U.S. may dip into a recession. Already, sectors like commercial real estate and the mortgage business have been hit significantly hard.
May CPI has second good print in a row. Consumer prices were flat in May, defying expectations for a slight rise. It was unexpectedly unchanged in May, amid cheaper gasoline, but inflation likely remains too high for the Federal Reserve to start cutting interest rates before September against the backdrop of a persistently strong labor market.
The unchanged reading in the consumer price index reported by the Labor Department's Bureau of Labor Statistics on Wednesday followed a 0.3% increase in April. The CPI has been trending lower since posting solid readings in February and March. Price pressures could continue moderating as major retailers, including Target, slash prices on goods ranging from food to diapers as they seek to lure inflation-weary consumers.
In the 12 months through May, the CPI advanced 3.3% after increasing 3.4% in April.2
Economists polled by Reuters had forecast the CPI edging up 0.1% and gaining 3.4% year-on-year. Though the annual increase in consumer prices has slowed from a peak of 9.1% in June 2022, inflation continues to run above the U.S. central bank's 2% target.
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TIP OF THE MONTH
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Rather being stressed over making the right decision, make the right decision.???
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Fed officials are later Wednesday expected to leave the central bank's benchmark overnight interest rate unchanged in the current 5.25%-5.50% range, where it has been since July. The Fed has raised its policy rate by 525 basis points since March 2022.
Financial markets expect the Fed to start its easing cycle in September, though that conviction is waning. Some economists are leaning towards a rate cut in December, but others are not so sure that borrowing costs will be lowered this year. Excluding the volatile food and energy components, the CPI climbed 0.2% in May after rising 0.3% in April.
Moreover, a tame CPI reading can boost investor confidence in the overall health of the economy. This can lead to increased investment activity and potentially higher stock prices. Investors may be more willing to put their money into stocks if they believe inflation is under control and the economy is on a stable growth path.?
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QUOTE OF THE MONTH
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"The difference between successful people and others is not a lack of strength, not a lack of knowledge, but rather a lack of will."
领英推荐
- Vince Lombardi -??
U.S. home sales see record drop in May. Sales of new single-family homes dropped by 11.3% in May, according to a new report from the U.S. Commerce Department and the National Association of Realtors says home contract signings have hit a record low.
Most analysts are blaming high mortgage rates for the decline in single family home sales. Homeowners that have a 3.5% thirty-year mortgage are reluctant to sell their property and buy a new property at 7% mortgage.
Moreover, first time home buyers have difficulty qualifying for mortgages that are at 7%. The feds raised rates 5.25% to slow inflation. This has had a negative effect on at least a dozen Interest sensitive industries, real estate is one of them.3 ?
At the end of the day, the July 2024 Economic Update offers numerous reasons for investors to be optimistic. Many of the negative things that took the market down are seemingly now in the rear view mirror. By staying informed and making smart investment decisions, there are plenty of opportunities to grow wealth and achieve financial goals.
As a financial advisor, I recommend that you diversify your portfolio across different asset classes, regions, and sectors, and adjust your risk exposure according to your goals and preferences. Please contact me if you have any questions or concerns about your financial situation or plan.?
Many of the views and opinions included herein may or may not be shared by Western International Securities and or its registered representative and should not be construed as investment advice.?
I'll bring you a recap of the July developments in the economy and markets at the top of August.
Between now and then, please feel free to call me or email me at the number or e-mail listed below.
You can also schedule appointments directly to my electronic calendar using the appointments hyperlink in my signature file below.?
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Sincerely,
Chris W. Polimeni, MBA
Financial Advisor
Branch Manager
Western International Securities
Member FINRA/SIPC
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19200 Von Karman Ave. Suite 600
Irvine, CA 92612
Phone: 800-874-0768
Fax: 949-222-5704
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Website: https://chrispolimeni.com??
Securities and Advisory services offered through Western
International Securities, Inc., Member FINRA / SIPC.
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Securities, Inc. are separate and unaffiliated entities.
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3 https://finance.yahoo.com/news/bidens-debate-stumble-comes-at-a-crucial-moment-in-the-fundraising-race-135344935.html
1 https://finance.yahoo.com/news/june-jobs-report-us-labor-market-adds-206000-jobs-unemployment-rate-rises-to-41-112324134. html
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