7/7 - Weekly Economic Highlights

The U.S. Bureau of Labor Statistics reported today that payrolls increased by 209,000 in June, falling short of consensus estimates. The sectors that experienced the strongest hiring were government, education and health services, social assistance, construction, professional and business services, and leisure and hospitality. The household survey showed a total employment increase of 273,000, while the unemployment rate decreased from 3.7% in May to 3.6% in June, indicating a faster rate of job-finding for new labor force entrants. Average hourly earnings also saw a year-on-year increase of 4.4% in June, unchanged from May. ADP's employment data for June further showcased the resilience of labor markets, with private hiring surging by 497,000 and reductions in layoffs, resulting in an eight-month low for job cuts by employers. Despite slight disparities between the government's employment report and the ADP data, both reports overall indicate a robust labor market.

Better-than-expected economic data this week resulted in an increase in Treasury yields. The 2-year Treasury note yield briefly surpassed 5%, but subsequently dipped below that level to 4.96% as of this morning, marking a 0.06% increase for the week. The 10-year Treasury yield rose by 0.22% for the week, reaching 4.06%. The yield inversion between the 2-year and 10-year Treasury widened to 109 basis points at the beginning of the week, its highest level since last March, but fell to 90 basis points as the yield curve flattened toward the end of the week. Market participants generally anticipate that the Federal Reserve will raise the federal funds rate by 0.25% at its meeting on July 26th.

In the upcoming week, market participants will focus on corporate earnings reports and inflation data. The second-quarter earnings season is about to begin, and analysts expect a 6.8% decline in profits and a 0.4% decline in revenue growth for Standard and Poor's 500 companies. Investors will closely monitor these reports to assess the health of corporations in the current economic environment. The recent employment report and upcoming inflation data will also be significant factors in shaping the Federal Reserve's overall economic outlook and any potential changes to monetary policy at the Federal Open Market Committee (FOMC) meeting on July 26th. The Chandler Team believes there is a high probability of a 0.25% increase in the federal funds rate at the upcoming FOMC meeting, which would result in a range for the federal funds rate between 5.25% and 5.50%. While there are indications of continued economic resilience, we expect that the Federal Reserve will maintain flexibility in its monetary policy and make any necessary adjustments based on incoming economic data.

Next Week:

Consumer Credit, NFIB Small Business Optimism, Consumer Price Index (CPI), Federal Reserve Beige Book, Producer Price Index (PPI), University of Michigan Sentiment

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