Wall Street ended the week mixed as hopes of more aggressive Fed easing this year were balanced with concerns about a recession as the weakness in the labor market. On Friday, the August jobs report showed an anemic 22K rise in payrolls last month, while revisions showed the economy actually lost jobs in June. The markets now fully expect a September Fed rate cut of 25 bps, with a 10% chance the Fed goes big with 50 bps.
Unemployment climbed to 4.3%. A few years ago, unemployment hovered at half century lows. Now the dreaded percentage is at its highest point since 2021 and the depths of the pandemic. This from the Bureau of Labor Statistics, an arm of the US Department of Labor where last month, Trump fired the commissioner after a similarly sobering report. Job growth has moderated materially in recent months, openings have declined and wage gains have eased—all of which weigh on broader economic activity.
The S&P 500 closed up 0.3% for the week, with the Dow down 0.3% and the Nasdaq rallying by 1.1%.
Future Wealth’s View
US Corporations are beginning to hurt from the tariffs and the pullback in consumer spending. The only two sectors that appear to be doing well are Technology, driven by AI spending and Financials from the wave of new IPOs and potentially lower interest rates. But, Wall Street rewards the wealthy who can afford to take the risks and invest in the stock market. The average consumer is struggling to make ends meet with higher prices and the spate of layoffs as companies cut back on hiring and spending.
We are only a week into a historically weak month of September and sobering economic news is already piling up. We had news of six straight months of shrinking manufacturing earlier this week. On Friday, job openings fell in July to the lowest in 10 months, adding to unemployment data showing America’s once robust jobs landscape continues to darken. Next week, we get the CPI (Consumer Price Index) which could potentially reflect higher inflation from the previous reading. And, all the data will lead us to the Fed meeting on Sep 17th, which could decide the direction of the stock market.
Only time will tell if this movie has an happy ending.