Thursday's Scoop: Cautious🌤️

Hey friends - almost Friday. Some Olympics notes:

• USA gold medal count up to second, behind China, and still most medals overall.

• Check out the USA men’s beach volleyball quarterfinal. Also, if you haven’t seen the court yet, it might be the most epic of all time. It’s a beach court in front of the Eiffel Tower.

• I feel bad for the triathlon people forced to swim in the Seine. It looks nasty and has barely acceptable levels of bacteria for swimming.

• USA badminton goes hard, as does women’s team fencing.

• Good swimming today.

Insiders, look out for the Weekly Scoop tomorrow.

Here’s what you need to know today to inform your work, spending, and investments:

1. Layoffs jumped last week.

2. Americans worked more hours more productively last quarter, but wages aren’t growing as fast.

3. US manufacturing is still in a slump.

Unemployment Rate: 4.1%
^{Still near historic lows}

Layoffs are rising but remain low relative to history. The Labor Department reported initial jobless claims jumped to 249,000 last week, the highest level since August 2023. Michigan and Missouri saw significant increases. Continuing claims, representing those receiving unemployment benefits for consecutive weeks, also rose to 1.88 million, the highest since November 2021. While hiring has slowed, the jobless rate remains historically low. Recent data from Challenger, Gray & Christmas show summer job cuts are still relatively modest, with July layoff announcements down 49% from June and up only 9% from a year earlier. The increase in layoffs this month could signal a shift in the economy, but so far, hiring and firing rates are still relatively normal.

Americans worked more hours more productively last quarter, but wages aren’t growing as fast. The Labor Department reported that nonfarm productivity increased at a 2.3% annualized rate in the second quarter, a significant rise from the 0.4% pace in the first quarter. However, companies haven’t been as quick with the salary raises. Hourly compensation rose at only a 3.3% rate last quarter after rising by 4.2% in the first three months of the year. Even though wages aren’t growing as quickly, they’re still improving and catching up with the cost of living. Hourly compensation rose 0.4% faster than inflation last quarter. That’s a welcome improvement for Americans after a long period of working harder while wages lagged the rising cost of living. Over the past year, workers have increased their output by 3.4% and hours worked by 0.7%, but their inflation-adjusted compensation hasn’t increased at all.

US manufacturing activity hit an eight-month low in July. The Institute for Supply Management reported that its manufacturing Purchasing Managers' Index (PMI) dropped to the lowest since November, indicating a continued contraction of business activity in the sector that makes up 10% of the economy. However, manufacturing may not be struggling as much as the sentiment surveys suggest. Federal Reserve data released earlier this month showed factory production rebounded at a 3.4% annualized rate in the second quarter, and Commerce Department figures indicated a pickup in goods spending, particularly on motor vehicles. Considering all of this data, it’s clear that the manufacturing sector has been in a slump for over a year, but there are some mixed signals of a potential rebound.

The Market: ⬇️ -1.4%
S&P 500: 5,446.68
1Mo: -1% | 1Yr: +19% | 5Yr: +86%

The market slumped on Thursday after a spike in layoffs and a slump in the manufacturing sector fueled concerns about a possible recession. The Federal Reserve chose not to ease its restrictive policies at its July meeting yesterday but hinted at lowering borrowing costs in September. With a September interest rate cut within expectations, investors are growing worried that the Fed is waiting too long.