In The Know – September 6, 2024

At Financial Issues, we help you stay informed about the financial issues of the day. We keep you abreast of what’s happening in the economy and the markets and help you understand how that impacts your personal financial situation.

I’ve got quite a few takeaways from this week, ending September 6, the first week of September. Looking at the markets, all three stock indices have fallen from their all-time highs. The S&P 500 is off two and a half percent since just a few days ago. The Dow is down almost 2% since August 30, and the Nasdaq is down seven and a half percent since mid-July. We are nearing correction territory on the Nasdaq already.

If you want to know how what’s happening in the market is impacting our biblically responsible investment strategy, we encourage you to become a partner and check out our partner commentary. If you are already a partner and haven’t read it yet, we were a little bit late posting it this week because of the short week, but it was posted on Wednesday, so be sure to check that out.

This week, we received the ISM Manufacturing Index report, which indicates the level of demand for products by measuring the amount of ordering activity at the nation’s factories. The August ISM Manufacturing Index showed that manufacturing is still in recession, with little indication that it is heading out of contraction territory. The ISM Manufacturing Index was little changed month over month at 47.2, compared to 46.8 in July and 48.5 in June. The six-month average is now 48.5, so we are still in contraction territory for the manufacturing sector.

We also got the Beige Book results. The Beige Book is a qualitative report produced by the Fed and is published eight times a year, two weeks before every Fed meeting where they discuss what to do with interest rates. Data in the report is compiled by the twelve district banks of the Fed, which examine economic conditions in their respective regional economies. The FOMC uses this information to make important decisions about the national economy.

The latest Beige Book report, which the Fed is reviewing in preparation for their meeting on September 18 (it was originally scheduled for the 21st), indicates that the economy is slowing. Economic activity grew in only three of the twelve districts, while it was flat or declining in the other nine. The report also highlighted lackluster hiring, as well as a downturn in consumer spending and manufacturing activity in most districts. This doesn’t paint a very positive picture for the economy.

We received a lot of job data this week. Earlier, we got the JOLTS report—Job Openings and Labor Turnover Survey—which showed that job openings in July (yes, we know it’s a bit dated, but that’s how the government works) totaled 7.673 million, below the estimate of 8.1 million and down from a revised 7.9 million in June. This marks the lowest number of job openings reported since January 2021, and we are approaching pre-COVID levels.

ADP also released its jobs report. ADP, which handles payroll for about a million companies across the U.S., has a strong grasp of what’s happening in the private sector. ADP reported that U.S. private employers hired the fewest workers in August since January 2021. The data for the prior month was revised lower, potentially hinting at a sharp labor market slowdown. ADP said that 99,000 net jobs were added, which was 46,000 below expectations. July was revised down by 11,000 to 111,000. Small businesses with 20 to 49 employees, which have been hurting under Bidenomics, lost 12,000 jobs, while medium-sized companies added the most.

Wage growth, according to ADP, was little changed in August. Workers who stayed at their jobs saw pay raises of about 4.8%, the same as in July. Those who changed jobs received a 7.3% raise, which was slightly higher than in July.

The bottom line here is pretty straightforward: the rate of hiring continues to slow, and that’s the common theme across all these reports.

The big number of the week came out this morning—non-farm payrolls. Economists expected 161,000 jobs to be created, but we got 142,000. That’s a weak number. What’s worse, July’s figures were revised lower by 25,000, and June’s were revised lower by 61,000. With these revisions, June and July’s job creation totals were revised 86,000 lower.

Most of the jobs being created right now are coming from the government, including the healthcare sector, which is tied closely to government funding. When an economy is driven by government job creation, that’s often a sign of a recession.

To add context, we’ve been talking about the big revision from March 2023 to March 2024, where 818,000 jobs were revised away. That’s 68,000 jobs per month, on average, erased with the stroke of a pen. If July’s number of 89,000 is revised by the same amount, we could be dangerously close to negative job creation territory, meaning we’re losing jobs.

The unemployment rate ticked down to 4.2% last month, but the U-6 unemployment rate—which includes the total unemployed, plus those marginally attached to the labor force, plus those working part-time for economic reasons—rose to 7.9% in August, up from 7.8% in July. Labor participation remained unchanged at 62.7%. However, troublingly, participation among men went down, while participation among women went up.

To put this into perspective, the labor participation rate pre-pandemic was 63.3%, so we’re still below that level. Hourly wages were up 3.8% year over year. While that may sound positive, when you factor in inflation, most people are barely staying ahead of it, if at all.

Is there any good news? Well, Jesus still rules.

What’s coming next week? Well, we get inflation reports—CPI and PPI numbers for August. We’ll also receive a report on consumer sentiment. In about a month, we’re going to start getting preliminary reports for earnings season. We’re almost at the end of another quarter, and corporate earnings are flattening. We had three consecutive quarters of negative earnings, which is considered an earnings recession. From the fourth quarter of 2022 to the second quarter of 2023, corporate earnings were negative.

For the past four quarters, it’s been easy for companies to show earnings growth because anything is better than a negative, right? Going forward, corporate earnings will have a harder time impressing us, as those negative comparisons will be falling off.

Now that you’re in the know about recent and upcoming financial issues, we hope you’ll learn more about our ministry and how we can help you integrate these issues into your own stewardship. More importantly, you can find out how you can help defund darkness by adopting our biblically responsible investment strategy and honor Christ in the way you invest.