9/1/17 – Economic Growth and Jobs Headline Week

Strong Growth and Decent Jobs Headline the Week

Stocks continued moving higher this week, with the Dow gaining 0.8% while the S&P 500 added 1.4%. On Wednesday, stronger than expected economic growth numbers were released. Growth in the second quarter was estimated at an annualized rate of 3.0%, exceeding the 2.7% consensus estimate. This is a good number, but it is only one quarter. Multiple quarters over the last eight years have seen annualized growth over 3%, and yet the economy grew at a less-than 2.5% rate every year. It’s always good to see positive growth and hopefully this is a start of a higher growth trend, but I’d like to see it for a few more quarters before I’m a believer. Read More

The August jobs report released this morning showed the economy added 156k net new jobs while the unemployment rate ticked higher to 4.4% from 4.3%. The consensus estimate had been for 179k new jobs this month. Additionally, the last two months of data were revised lower. All this supports my above thought that 2Q growth might be more of a blip than the start of a trend. We’ve basically been in the same job and economic growth trend since the financial crisis ended in 2009. Job growth averaging under 200k a month with annualized economic growth under 2%. Both figures are okay, but underwhelming. Growth is more difficult on a bigger base, but from the end of World War II through 2000, the US economy averaged 3.1% annualized growth. Read More

The Houston area suffered a massive hurricane over the last week. Some parts of Houston received almost 50 inches of rain in 4-5 days. The average annual rainfall in the US is 39″ a year, so this storm dropped 125% of the national average in less than a week. That’s hard for me to comprehend. In total, over 15 trillion gallons of water hit the Houston area, that’s double what Katrina dropped on New Orleans. There’s been a lot of talk about whether Houston was prepared and how the response has been, but so far only 30 people have died. During Katrina, over 1,800 people died. That seems like a pretty good result, all things considered.

Oil declined again this week, dropping 1.1% to close at $47.29/barrel. The yield on the 10-yr Treasury moved slightly lower, rounding up 2.17% versus rounding down to 2.17% last week. The average rate on a 30-yr fixed continued lower to 3.82% from 3.86% last week.

Markets are closed on Monday for the Labor Day holiday. Have a happy long weekend.

Close Weekly YTD
Dow Jones 21,987.56 0.8% 11.3%
S&P 500 2,476.55 1.4% 10.6%
Oil 47.29 (1.1%) (12.2%)
10-yr Treasury (∆ in bps) 2.17 (1) (28)

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