THE JULY LABOR REPORT WAS A POSITIVE SURPRISE

Wow!  July’s jobs surprised on the upside. As noted several times most, including me, expected a downside surprise.

Non-farm payrolls rose by 1.763 million vs. the consensus view of 1.5 million.  Private sector jobs rose by 1.462 million vs. the 1.2 million estimate.  Prior month revisions were insignificant. The unemployment rate fell to 10.2% from 11.1%.  Average hourly earnings rose by 0.2% instead of falling by 0.5%.  Weekly hourly earnings met expectations.

The negative is the LPR falling to 61.4% from last month’s 61.5%.  Consensus thought it would rise to 61.8%.

Some are dismissing this report stating that August will show a decline in jobs.  I do not know how to respond to this remark.  The reference week for July’s data (or the week the information was gathered) was the same week that Corona cases were increasing at a 2.0% rate.

I must write the data is still horrible but at least it is not as bad as projected.  We are living in unprecedented times where there are no guideposts in which to follow.  Unfortunately, everything is looked at in a political lens and yes Virginia everyone has a confirmation bias.

Perhaps the only certainty to write the next 90 days the vitriol and the mis information will rise to levels that have perhaps not experienced in at least a generation.  In my view the election will become the over riding event for the simple reason of the massive differences between the two candidates.

One is viewed as a bore while the other is campaigning upon upending many established norms and policies.

I believe life sometimes mimics Hollywood.  In some regards today is a hybrid between The Siege—a 1998 movie starring Bruce Willis as General who is charged with capturing and restoring order in NYC following several terrorist attacks—and American Presidency starring Michael Doulas that was released in 1995.

There is a great line in the American Presidency when the Chief of Staff played by Martin Sheen stating for victory to be had in November stay with the mantra of “hard on crime and soft on taxes.”  Today the presumed Democratic presidential candidate is endorsing the opposite violating the age-old path to victory as per Hollywood.

Today there is A Siege reminiscent to The Siege but this siege is on Corona Virus.  The premise however is the same…a massive violation of rights for a perceived greater reason.

The movie American Presidency ended with Michael Douglas retuning to the election with renewed fervor and The Siege ended with Bruce Willis falling into disgrace.

How closely will the next three months correlate to these two movies.  To date there are some interesting correlations.

As written many times life is stranger than fiction and 2020 has been the year of The Black Swans, events that statistically have an extremely low probability of occurring but are constantly occurring.

Radically changing topics, markets Friday were relatively benign, basically ignoring the employment report, rising trade tensions and stimulus dissentions.

This week the economic calendar is comprised of retail sales, several inflation and manufacturing indices and sentiment indicators.  What will the data suggest and how will it be interpreted?

Last night the foreign markets were mixed.   London was up 0.41%, Paris up 0.20% and Frankfurt up 0.22%.  China was up 0.21%, Japan down 0.39%  and Hang Sang down 0.63%

The Dow should open mixed on the President’s executive action bolstered some enthusiasm.    The 10-year is up 2/32 to yield 0.58%.

 

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.