Weekly Investment & Economic Talking Points
- Shrugging off May’s low jobs number, the US economy generated 220k new jobs in the month of June. The unemployment rate ticked up to 4.4% – this was due to a 361k increase in the workforce, which is good news.
- Over the last 12 months, the labor force has grown 1.7 million while the jobless rate dropped a half of a percent. The participation rate remains low compared to its historical averages but the 12-month moving average has been gradually rising since 2016.
- The ISM non-manufacturing index rose to 57.4 in June, well above expectations. (Levels above 50 signal expansion; levels below 50 signal contraction.) Continuing the broad-based strength reported from the service sector over the past year, sixteen of eighteen industries reported growth in June, while just one, “other services,” reported contraction.
- Meanwhile the most forward-looking indexes – new orders and business activity – have both shown the strongest starts to a year in more than a decade. As I have said before, monthly data can be volatile, it’s the trend that matters, and the trend is pointing to growth across sectors that should continue in the months ahead.
- The ISM Manufacturing index rose to 57.8 in June, also beating all estimates. Manufacturing activity expanded at the fastest pace in nearly three years in June, and recorded the second highest reading going back to early 2011. Moreover, growth continues to remain broad based, with fifteen of eighteen industries reporting growth, while just three reported decline.
- The two most forward-looking indices – new orders and production – showed the largest gains in June, and continue the trend higher that started after last year’s elections. And through the first half of 2017, the new orders index has averaged the highest readings to start a year since 2004!
Earnings season starts again this week. We will not only be looking at bottom line (profit) numbers but also top line (revenue) and forecasts. Sometimes the top line and forecasts are more important than last quarters profits, and with all of the uncertainty coming out of Washington these will be important to analyze.