Chief Economist Scott Brown discusses the latest market data.
The June Employment Report was mixed but strong. Nonfarm payrolls were reported to have risen by 850,000 (vs. a median forecast of 700,000). However, part of that increase was due to a quirk in education. Less hiring during the school year meant fewer layoffs at the end of the school year. We lost 607,000 education jobs this June, whereas we would have lost about 900,000 in a typical pre-pandemic June. That resulted in a 268,000 seasonally adjusted gain, exaggerating the headline payroll figure (which would have otherwise risen 582,000). Job growth was still strong, reflecting a 343,000 gain in leisure and hospitality. Many of those jobs are part time, so average weekly hours fell. The unemployment rate edged up unexpectedly to 5.9% (from 5.8%). Don’t read too much into that – the household survey data tend to be a bit choppy. However, it’s interesting to note that the teen unemployment rate, although higher in June (9.9%, vs. May’s 9.6%), is well below where it was before the pandemic (11.5% in February 2020).
Other economic data releases were consistent with a strengthening economy. The ISM Manufacturing Index slipped to 60.6 in June (down from 61.2 in May), with supply managers noting ongoing supply chain constraints, manpower issues and widespread input price pressures. The Conference Board’s Consumer Confidence Index rose to 127.3 in June, vs. 120.0 in May and 87.1 at the start of the year.
Next week, the economic calendar is thin. The ISM Services Index is likely to remain strong, but reflecting supply chain and staffing issues. The mid-June Fed policy meeting minutes are likely to show some difference of opinions. Some officials (district bank presidents, who don’t all vote on policy) were likely more worried about inflation than others (the Fed governors, who all vote on policy).
|Last||Last Week||YTD return %|
Consumer Money Rates
|Last||1 year ago|
|Last||1 year ago|
|Dollars per British Pound||1.3778||1.247|
|Dollars per Euro||1.1842||1.122|
|Japanese Yen per Dollar||111.27||107.50|
|Canadian Dollars per Dollar||1.239||1.356|
|Mexican Peso per Dollar||19.841||22.477|
|Last||1 year ago|
|Last||1 month ago|
|10-year municipal (TEY)||1.538||1.476|
|Last||1 month ago|
|10-year municipal (TEY)||1.569||1.492|
Treasury Yield Curve – 07/02/2021
As of close of business 07/01/2021
S&P Sector Performance (YTD) – 07/01/2021
|July 5||—||Independence Day Holiday, obs. (markets closed)|
|July 6||—||ISM Services Index (June)|
|July 7||—||Job Opening and Labor Turnover Survey (May)|
|—||FOMC Minutes (June 15-16)|
|July 8||—||Jobless Claims (week ending July 3)|
|July 13||—||Consumer Price Index (June)|
|July 15||—||Industrial Production (June)|
|July 16||—||Retail Sales (June)|
|July 28||—||FOMC Policy Decision|
|July 29||—||Real GDP (2Q21 advance estimate, benchmark revisions)|
|August 6||—||Employment Report (July)|
All expressions of opinion reflect the judgment of the author and are subject to change. There is no assurance any of the forecasts mentioned will occur or that any trends mentioned will continue in the future. Investing involves risks including the possible loss of capital. Past performance is not a guarantee of future results. International investing is subject to additional risks such as currency fluctuations, different financial accounting standards by country, and possible political and economic risks, which may be greater in emerging markets. While interest on municipal bonds is generally exempt from federal income tax, it may be subject to the federal alternative minimum tax, and state or local taxes. In addition, certain municipal bonds (such as Build America Bonds) are issued without a federal tax exemption, which subjects the related interest income to federal income tax. Municipal bonds may be subject to capital gains taxes if sold or redeemed at a profit. Taxable Equivalent Yield (TEY) assumes a 35% tax rate.
The Dow Jones Industrial Average is an unmanaged index of 30 widely held stocks. The NASDAQ Composite Index is an unmanaged index of all common stocks listed on the NASDAQ National Stock Market. The S&P 500 is an unmanaged index of 500 widely held stocks. The MSCI EAFE (Europe, Australia, Far East) index is an unmanaged index that is generally considered representative of the international stock market. The Russell 2000 index is an unmanaged index of small cap securities which generally involve greater risks. An investment cannot be made directly in these indexes. The performance noted does not include fees or charges, which would reduce an investor’s returns. U.S. government bonds and treasury bills are guaranteed by the US government and, if held to maturity, offer a fixed rate of return and guaranteed principal value. U.S. government bonds are issued and guaranteed as to the timely payment of principal and interest by the federal government. Treasury bills are certificates reflecting short-term (less than one year) obligations of the U.S. government.
Commodities trading is generally considered speculative because of the significant potential for investment loss. Markets for commodities are likely to be volatile and there may be sharp price fluctuations even during periods when prices overall are rising. Specific sector investing can be subject to different and greater risks than more diversified investments. Gross Domestic Product (GDP) is the annual total market value of all final goods and services produced domestically by the U.S. The federal funds rate (“Fed Funds”) is the interest rate at which banks and credit unions lend reserve balances to other depository institutions overnight. The prime rate is the underlying index for most credit cards, home equity loans and lines of credit, auto loans, and personal loans. Material prepared by Raymond James for use by financial advisors. Data source: Bloomberg, as of close of business July 01, 2021.
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