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July’s employment data is released at 8:30.  To remind all May’s data flopped and June’s data flipped, the result of which caused a radical change in monetary policy assumptions.  Will July’s data be the disaster that we experienced in June when only 11,000 jobs were added, the fewest in almost six years?  Or will the statistics be similar to June when 287,000 were created, the most in eight months?

Many times I have commented about weekly jobless claims. Claims have held below 300,000 for 74 consecutive weeks—the longest stretch since 1973 according to Bloomberg.  Job vacancies are hovering near 15 year highs with just 1.4 unemployed workers fir every available role.  The unemployment rate is below the rate most view as full employment.

I have also remarked about the collapsing labor participation rate (LPR) which is around 35 year lows, data that is in a direct contradiction of the statistics above.  Moreover the lack of wage growth has become a volatile election issue, also a direct contradiction to the above job strength narrative.

I believe there are many dynamics at hand including the vast proliferation of the welfare state that encourages or at least reduces the drive to reenter the workforce, to vastly under skilled/educated workforce where passion is regarded more than utility, as well as changing demographics.

I must also add large employers loathe hiring additional workers because of increased regulatory and healthcare burdens while small business creation is stifled, a major result of the onerous financial regulations of Dodd Frank.

How will July’s data be interpreted?  Non-farm and private sector payrolls are expected to rise by 180k and 170k, respectively.  A 4.8% unemployment rate is forecasted, a 0.2% increase in average hourly earnings, a 34.4 hourly work week and a 62.7% LPR.

Last night the foreign markets were up.  London was flat, Paris up 0.39% and Frankfurt up 0.13%.  China was down 0.19%, Japan flat and Hang Sang up 1.44%.

The Dow should open flat but this could change radically if the data is greatly different that the expected view. The 10-year is unchanged at a 1.49% yield.

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Ken Engelke

Chief Economic Strategist Managing Director

The views expressed herein are those of Kent Engelke and do not necessarily reflect those of Capitol Securities Management. Any opinions expressed are statements of judgment on this date and are subject to certain risks and uncertainties which could cause actual results to differ materially from those currently anticipated or projected. Any future dividends, interest, yields and event dates listed may be subject to change. An investor cannot invest in an index, and its returns are not indicative of the performance of any specific investment. Past performance is not indicative of future results. This material is being provided for informational purposes only. Any information should not be deemed a recommendation to buy, hold or sell any security. Certain information has been obtained from third-party sources we consider reliable, but we do not guarantee that such information is accurate or complete. This report is not a complete description of the securities, markets, or developments referred to in this material and does not include all available data necessary for making an investment decision. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. If you would like to unsubscribe from this e-mail distribution, please reply to this e-mail and indicate that you wish to unsubscribe in your response.