The U.S. Economy Created 1.783 Million Jobs in July… The unemployment rate fell from 11.1% to 10.2%.
What it means— Good news: we’re almost below double-digit unemployment! Of course, we’re still almost triple February‘s unemployment rate. Job creation and the unemployment rate beat expectations. However, it’s hard to identify a reliable trend because the surveys were taken three weeks ago. In the age of COVID-19, that seems like a decade ago.
Hourly earnings rose, which, counterintuitively, is a bad thing. Higher earnings don’t reflect companies paying workers more. The retained or re-hired labor force represents more highly-paid employees. Businesses have yet to hire back the legions of lower-paid frontline workers. These are the people who are more likely to be living paycheck to paycheck and who are at risk since the federal unemployment bonus has expired.
Continuing Jobless Claims Increased From 30.8 Million to 31.3 Million… Initial jobless claims fell by 210,000.
What it means— Continuing jobless claims in both the state and federal programs remained stubbornly high last month at more than 30 million. Claims increased by 500,000.
With states still reporting high numbers of COVID-19 cases, a return “to normal” remains stalled. More temporary layoffs will become permanent. Summer tourist destinations are watching their season come to an end without the regular influx of people and cash. Expect many restaurants and attractions in such locations to close permanently as summer turns to fall.
Retailers are expecting their second highest revenue season – back to school sales – to be significantly reduced. Carter’s, a kid apparel firm, Macy’s, Under Armor and Newel Brand which makes many school supplies are reporting declining sales forecasts.
Factory Orders Up 6.2% in June After Rising 7.7% in May… Auto manufacturing led the rebound.
What it means— Even with the jump in May and June, factory orders were still 10.1% lower than they were in June of last year. Orders for motor vehicles and parts increased 86.2% as the carmakers ramped up production. Non-defense capital goods excluding aircraft, a proxy for business spending, rose 3.4%. Unfortunately, many manufacturers reported that demand remains weak or slow and that they were laying off workers, which will put a lid on further recovery and feed into the unemployment loop.
More upbeat is rising prices for framing lumber which indicate strong demand due to construction. This is a positive for employment stabilizing household incomes and, eventually, consumption.
Senior Loan Officers Report Tighter Lending Standards… Across the board, bank officers responding to the Senior Loan Officer Opinion Survey in July reported higher lending standards over the past three months.
What it means— It makes sense, but you wouldn’t know it from all the rah-rah coming out of the auto and housing industries. Lenders have no idea which companies and individuals will survive the pandemic. Government programs aren’t making it any easier. Because of the Payroll Protection Program and Main Street Lending Facility as well as weekly federal unemployment bonus checks, many entities and people are still financially afloat. What happens when those programs end?
Borrowers will have many months and years left on new loans keeping banks on the hook for defaults. While reducing available credit and raising qualification standards in this economy makes sense, it dampens economic activity just as we need more of it.
Yes, Companies Are Tracking You… And Ranking You… Name brand companies TransUnion and CoreLogic, as well as firms you’ve probably never heard of like HireVue and Retail Equation, gather millions of bits of digital data from your apps, cell phones and other sources.
What it means—Consumers give up data voluntarily by checking the “Agree to terms” box necessary to use a site or service. The data collected is used to develop predictive models on how individuals spend and behave. Your information is sold to service providers, landlords, retailers, and others. It may affect how much you pay for car insurance. Your wait time “on hold” may be longer while higher rated customers are served. You may even be denied a refund if you return items too often.
Before letting you rent an apartment, a landlord may consider your expected ability to handle a financial shock or even your ability to pay more next year. With so much data freely floating around and with increasing computing power, companies can access specific, personal information like never before.
Oh, and there’s one other thing. They aren’t required to tell you. Want to stop it? Cancel cable TV. Discard your computer. Replace email with snail mail. Trash your cell phone for a land line (and a pay phone if you can find one).
“When the facts change, I change my mind.
What do you do, sir?” ~ John Maynard Keynes
Our plan is “the plan will change.”
What is your plan?
Relative strength measures the price performance of a stock against a market average, a selected universe of stocks or a single alternative holding. Relative strength improves if it rises faster in an uptrend, or falls less in a downtrend. It is easily applied to individual positions in your portfolio and to sectors and asset classes.
A copy of our form ADV Part 2 is available online.
Investor Resources, Inc. only transacts business in states where it is properly registered or notice filed, or excluded or exempted from registration requirements. Follow-up and individualized responses that involve either the effecting or attempting to effect transactions in securities, or the rendering of personalized investment advice for compensation, as the case may be, will not be made absent compliance with state investment adviser and investment adviser representative registration requirements, or an applicable exemption or exclusion.
Data supplied by HS Dent Research