I can see the rain on my window pain
A weak US jobs report later today will turn a polite request from some quarters for the Federal Reserve to cut interest rates by 50 basis points rather than 25 at their meeting on the 17th to a stampede. On Wednesday, the number of job openings in the US fell to their lowest level for three and a half years and came in below expectations. Another possible indication is that the US economy continues to slow. The latest Beige book report which summarises commentary on Current Economic Conditions by Federal Reserve District, and is issued eight times a year. The latest report out this week, reported economic activity was flat or declining across most regions in the US in recent weeks. “Employers were more selective with their hires and less likely to expand their workforces, citing concerns about demand and an uncertain economic outlook,” the report said.
This week, the US yield curve, the spread between yields on the 2-year treasury compared to that of the 10-year, the often quoted indicator of an impending recession, finally dis-inverted after 26 months as 2-year yields continue to fall in greater expectation the Fed will be more aggressive when it comes to cutting interest rates. In his piece this week, Bloomberg economist John Arthurs commented, that the dis-invertion is when “History suggests that this is a signal that a recession is now truly imminent.” So it’s all a bit doomy and gloomy, and that’s why September has started in such a bad mood. Having said all that, one gets the sense that economists remain hopeful of the “soft landing” scenario. The US service sector, which makes up the bulk of the US economy, is not weakening. A weak stock market in September often sets up a nice run into the year end.
If you want some good news, the S&P Global UK Composite PMI, combining the reports of manufacturing and services, rose to 53.8 in August of 2024 from 52.8 in the previous month. This was an upward revision from the preliminary estimate of 53.4 and sharply above the initial market expectations of 52.9. It reflected the tenth consecutive expansion in British services activity.
Next week could be fun as it’s the first of the televised debates between the two current candidates standing for election as President of the United States. The two have very differing policies, particularly when it comes to taxation.