Week of June 3 - 7, 2019

Maureen Kelliher, CFA

Maureen Kelliher, CFA

June 12, 2019

Weekly Economic Review

Weekly Macro Updates

Initial Jobless Claims (Jun 1) 215k est., 218k actual, 218k prior
Continuing Claims (May 25) 1660k est., 1682k actual, 1662k prior
Factory Orders (Apr) -1.0% est., -0.8% actual, 1.3% prior: R-
ISM Non-Manufacturing Index (May) 55.4 est., 56.9 actual, 55.5 prior
Household Change in Net Worth (1Q) $4691b actual, -$3960b prior
ADP Employment Change (May) 185k est., 27k actual, 271k prior
Change in Nonfarm Payrolls (May) 175k est., 75k actual, 224k prior: R-
Two-Month Payroll Net Revision (May) 75k actual
Unemployment Rate (May) 3.6% est., 3.6% actual, 3.6% prior
Average Hourly Earnings YoY (May) 3.2% est., 3.1% actual, 3.2% prior
Average Weekly Hours All Employees (Apr) 34.5 est., 34.4 actual, 34.4 prior
Underemployment Rate (May) 7.1% actual, 7.3% prior
Consumer Credit (Apr) $13.000b est., $17.497b actual, $11.031b prior: R+
JOLTS Job Openings (Apr) 7496 est., 7449 actual, 7474 prior

 Strong or Improving
 Inconclusive or lacking trend
 Weak or declining
R+ Revised up
R- Revised down

Capital Market Implications

Employment reports for May were announced last week and, although positive, job creation during the month was less than expected (as both the ADP and BLS reports reported fewer than 100,000 new jobs added).  Hiring workers is not a linear process so having a weak month follow a strong one is not unusual and April’s numbers were very strong.  Averaging the two months together produces a number close to 200,000, which is similar to the pace of job creation over the last couple of years.  Job openings also remained healthy in April at approximately 7.5 million and the unemployment rate for May held steady at 3.6%.  Last week’s only negative report was factory orders, which declined -0.8% in April.

After weeks of fearing the worst from the trade skirmishes, capital market participants decided to look on the bright side last week and sent stocks higher for the first time in more than a month.  Last week’s mood brightened further when the Federal Reserve indicated a rate cut would be considered.  As such, the Dow Jones Industrial Average soared 4.8% and the S&P 500 Index climbed 4.5%.  Every sector of the market rose last week with cyclical sectors such as materials and technology taking the lead, up 9.2% and 6.0%, respectively.  International markets also joined the party, as foreign developed markets rallied 3.2% while emerging markets rose 1.0% for the week.  Although investors preferred stocks last week, the Fed’s rate-cut remark also helped to drive down yields and lift bond prices. The entire bond market was well bid throughout week with high yield and corporate bonds supported the most, up 0.9% and 0.5%, respectively.