In my view the August labor report indicated more strength than weakness.  Commenting about the perceived weakness, private sector and non farm payroll growth did nominally disappoint, posting a 130k and 96k increase, the gains were still considerably higher than the 100,000 new jobs required to maintain a steady unemployment rate.  Speaking of which, the unemployment rate held at 3.7%, near a half century low.

However of considerable significance was the greater than expected gain in wages, up 0.4% from the month earlier and 3.2% year over year but also the increase in the labor participation rate to 63.2% from 63.0% registered the month earlier.

Wage gains are now the greatest in over 10 years and the LPR has tied for the highest reading since August 2013.

Friday’s narrative was however was focused on the negative aspects of the report.

FRB Chair Powell also spoke Friday.  In my view his comments were in direct contrast to the prevailing market narrative that a recession is at hand.  The Fed Chair commented that he expects 2019 growth around 2% to 2.5%, views labor market as still tightening and a consumer that is in “good shape.”

In my view, the narrative is at critical cross roads.  Either the data must indicate a considerable slowing  [Note:  The Citicorp surprise index is positive for the first time since February]  or the narrative must change to one of strength rather weakness.

In other words the prevailing narrative will lose credibility, viewed as unsubstantiated noise that is perhaps overly influenced by blogs that have some other motives.

Several times I have referenced Jamie Dimon’s [CEO of JP Morgan] view of today’s financial “reports” as nothing other than unsubstantiated and meaningless comments,  lack credibility,  are written with “dubious intent” and perhaps the most efficient “pump and dump” scheme the markets have ever experienced.

Wow!  These comments would make the infamous Henry Blodget appear credible.

The economic calendar is comprised of several top inflation indices, retail sales, inventories and consumer sentiment surveys.  How will all influence trading and the prevailing narrative?

Last night the foreign markets were mixed.  London was down 0.55%,  Paris down 0.10%  and Frankfurt up 0.26%.  China was up 0.84%, Japan up 0.56%  and Hang Sang down 0.04%.

The Dow should open steady.  The 10-year is off 11/32 to yield 1.60%.


The views expressed herein are those of Kent Engelke and do not necessarily reflect those of Capitol Securities Management. Any opinions expressed are statements of judgment on this date and are subject to certain risks and uncertainties which could cause actual results to differ materially from those currently anticipated or projected. Any future dividends, interest, yields and event dates listed may be subject to change. An investor cannot invest in an index, and its returns are not indicative of the performance of any specific investment. Past performance is not indicative of future results. This material is being provided for informational purposes only. Any information should not be deemed a recommendation to buy, hold or sell any security. Certain information has been obtained from third-party sources we consider reliable, but we do not guarantee that such information is accurate or complete. This report is not a complete description of the securities, markets, or developments referred to in this material and does not include all available data necessary for making an investment decision. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. If you would like to unsubscribe from this e-mail distribution, please reply to this e-mail and indicate that you wish to unsubscribe in your response.