The focus this week was on the tight employment situation as a driver of inflation. Stocks rallied sharply on Tuesday as Labor Department report showed a 10% drop in job openings in August, despite there still being many more openings than unemployed workers. The rally fizzled on Friday when the September jobs report came in stronger than expected with unemployment falling. This raised the likelihood of the FED hiking another 0.75% in November. Still major stock indices ended the week with modest gains.
OPEC+ met and chose to cut it’s daily production by about 2MM barrels per day in November to stem the drop in oil prices in light of the global economic slowdown. President Biden expressed disappointment given the impact of the war in Ukraine and announced the release of 10MM barrels from the Strategic Petroleum Reserve. However, it is unlikely that OPEC+ production will fall by that daily amount. Of the 24 members of OPEC+ only 8 are producing up to the current targets. Of those 8, two routinely ignore their limits. Some estimates of the actual reduction in production will be closer to 800,000 barrels per day.
In the economic numbers:
- S&P Global released the following purchasing managers indices for the month of August. Keep in mind that anything over 50 represent expansion and under 50 represent contraction.
- U.S. manufacturing PMI rose from 51.5 to 52.0.
- U.S. services PMI rose from 43.7 to 49.3.
- China manufacturing PMI fell from 49.5 to 48.1.
- Eurozone manufacturing PMI fell from 49.6 to 48.4.
- Eurozone composite PMI fell from 48.9 to 48.1.
- Japan manufacturing PMI fell from 51.5 to 50.8.
- Japan services PMI rose from 49.5 to 52.2.
- Mexico manufacturing PMI rose from 48.5 to 50.3.
- Eurostat reported that Eurozone retail sales fell 0.3% in August and are down 2.0% from last August.
- The Commerce Department reported the U.S. trade deficit fell 4.3% in August as imports fell faster than exports.
- The Labor Department reported:
- The U.S. added 263,000 jobs in September and unemployment fell from 3.7% to 3.5%.
- Wages have risen 5.0% in September from a year ago, down from 5.2% in August.
- Seasonally adjusted first time claims for unemployment were 219,000, down from a revised 190,000 in the prior week.
- The 4-week moving average of claims, designed to smooth out volatility, 206,500 up from a revised 206,250.
- For the full unemployment report go here: https://www.dol.gov/ui/data.pdf .
- The EIA weekly oil report is here: http://ir.eia.gov/wpsr/wpsrsummary.pdf . Also, the EIA reported in the prior week:
- Field production of crude oil was unchanged at 12.0MM BPD.
- Natural gas storage rose 129BN cubic feet and is below the 5-year average at this time of year.
- Baker Hughes reported the number of active oil rigs rose 2 to 602. The number of active natural gas rigs fell 1 to 158.
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Loren C. Rex, CFP®, MA Erik A Smith, AIF®
Founder / Emeritus President & C.E.O.
Registered Representative of and securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Cambridge and Generations Financial Planning & Wealth Management are separate companies and are not affiliated.
These are the opinions of Loren Rex and Erik Smith and are not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice. The Indices mentioned are unmanaged and cannot be invested into directly.