Once again monthly US job gains fell outside the range of estimates. Strong back to back surges in nonfarm payrolls in June and July helped alleviate concerns that the labor market is faltering in response to slow growth. The May swoon which rattled all is looking more and more as a one off event.
Strong job gains coupled with a rise in the length of the average workweek and a larger than expected increase in average hourly earnings will result in an aggregate gain in employment income, essential to lifting household spending and economic growth in the second half of the year.
Because of the above, the Atlanta Fed increased their forecast for third quarter GDP to 3.8%, the greatest quarterly growth rates since the 5.0% pace registered in 3Q14.
If third quarter growth increases to this level, how will it impact the election? Will most think the data is skewed as 70% of society thinks the country is headed in the wrong direction? If the incumbent party utilizes the data as evidence of positive economic stewardship, will the party be regarded as out of touch with society?
Or will the data be viewed positively, given an electoral edge to the incumbent presidential party as some are already suggesting? I must write the two greatest consecutive of growth that occurred in the last eight years was the second and third quarter of 2014. The economy grew by 4.0% and 5.0% respectively.
The Democratic Party, who controlled the Senate and the Executive branch, was trounced at every level. It was a resounding defeat partially predicated by the electorate believing those in power were out of touch with reality.
Returning back to the data and market reaction, many viewed the statistics in a goldilocks manner…not to hot or too cold, non-threatening to monetary policy assumptions and increased corporate cashflows thus markets traded higher.
The Treasury market was crushed on the data. The dollar traded higher which negatively impacted commodities.
What will happen this week? Statistics released include retail sales, inflation data and several sentiment surveys.
Last night the foreign markets were up. London was up 0.05%, Paris up 0.48% and Frankfurt up 0.98%. China was up 1.06%, Japan up 2.44% and Hang Sang up 1.57%.
The Dow should open nominally higher as commodities are rallying on growth optimism. The 10-year is unchanged at 1.59%.
