THE LABOR MARKET REMAINS STRONG: In June, the U.S. economy added another 213,000 jobs. (It needs to create about 120,000 per month to keep up with population growth.) The unemployment rate actually increased back up to 4.0%, the first increase in ten months. This was largely due to the fact that over 600,000 who were previously classified as out of the job market have re-entered the job market, which is a positive sign of confidence in the economy. The Labor Force Participation rate increased from 62.7% to 62.9% after having declined for three straight months. Wage growth held steady at an annual rate of 2.7%. U.S. employers have added to payrolls for 93 straight months, the longest continuous jobs expansion on record.
STRONG LABOR MARKET CROWDS OUT TRADE WAR FEARS: For this week at least, stock prices moved higher on confidence created by strong labor market news. Companies are hiring which means companies are confident in the near future despite the trade tension. That trade tension got more tangible this week as actual tariffs, and not just threats, went into effect between the U.S. and China. The U.S. slapped levies on $34 billion of China’s exports on Friday, and China announced that it was applying tariffs on 545 U.S. items in retaliation. Predictably, the stocks that lagged a bit behind in a positive week were industrial firms, those most vulnerable to restrictive trade policies.
MOST AND LEAST AFFORDABLE U.S. CITIES: According to a report compiled from data from the National Association of Realtors, the Census Bureau and NerdWallet, below are the five most and least affordable cities in the United States:
- Decatur, Illinois
- Cumberland, Maryland
- Elmira, New York
- Binghamton, New York
- Peoria, Illinois
- San Jose-Sunnydale-Santa Clara, California
- Honolulu, Hawaii
- San Francisco-Oakland-Hayward, California
- San Diego-Carlsbad, California
- Los Angeles-Long Beach, California
CHINESE DEBT IN THE SPOTLIGHT: China is in the economic news these days largely because of the tariff noise. But China’s debt load continues to weigh heavily on economists. China’s rapid accumulation of government, household and corporate debt, particularly since 2009, raises concerns about the risk of a China-centric financial crisis that could trigger a global economic downturn. Chinese authorities have made some progress on curbing credit growth through a combination of ongoing structural reforms, but much more needs to be done. The government faces the balancing act of weaning China’s economy off debt-intensive activities while not fueling a dramatic and undesired economic slowdown. The result has been a further, though recently more moderate, increase in the debt-to-GDP ratio. These overall risks are mitigated to a degree by a number of factors, including China’s relatively closed banking system, its current account surplus, and high domestic savings rate (people save more when there is no government safety net). However, this difficult balancing act will be watched very closely.
Meanwhile, China’s main stock benchmark, the Shanghai Composite Index, is down 17% this year. It is down over 20% since it hit a high in January of this year.
NO COFFEE BRAKES: Keep drinking coffee! In a recent study by British researchers, which echoed recent similar findings by U.S. researchers, coffee drinking lowers the risk of death. Both regular and decaffeinated had the same effect. Overall, coffee drinkers were about 10-15% less likely to die than abstainers during a decade long study. Exactly what it is about coffee that helps is not known. Coffee has more than 1,000 chemical compounds, including antioxidants.