The jobs report of this past month paints a picture of an economy struggling. Only 114,000 jobs were added in the month of July, reinforcing Mish (financial analyst) and others who have said that the U.S. labor market is losing steam. It's low compared with expectations and makes me question exactly what causes this slowdown. Unemployment rose to 4.3 percent, demonstrating very clearly that not everything is going well with the job market.
I find it interesting how these numbers affect other areas, especially financial markets.
Sure, the bitcoin price didn't move; however, traditional markets reacted dramatically. The decline of Treasury yields may indicate that people are finally rethinking strategy. I would say probably because of expectations that the Federal Reserve may be over-aggressive on interest rates, I just can't help but feel like it is the current economic landscape driving traders to change their views.
The stock response, less than favorable, Nasdaq futures dropped 2.3%. This definitely puts pressure on investors. The ripple effect this could have on consumer confidence is hard to ignore. If people see the markets struggling, it might make them become more cautious in spending, which impacts economic growth even further.
I further noticed that the average hourly earnings only rose by 0.2 percent, missing expectations. This would then be a concern since wages that are stagnant eventually reduce the purchasing power of many people. It leads me to reflect on how these earnings go about influencing everyday life. If wages do not keep pace with inflation, it would actually be hard to maintain a decent standard of living.
The Fed rate-cut betting.
With a 70% chance anticipated for a 50-basis-point cut in September, it feels like traders are preparing for monetary policy to shift course. I wonder how this might unfold. Should the Fed indeed do that, there will be temporary relief experienced from that; however, I worry about what such a strategy could imply in the long run.
The recent dollar movement and prices of gold further drive home the message that there is uncertainty in the market.
On one hand, the weakening dollar suggests that investors are becoming risk-averse, while on the other, the reaching of the highest-ever price for gold does indicate they are moving towards safe assets. This shift is very telling because it shows a lack of confidence in other economic indicators and raises a question of where this economy is headed.