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It’s jobs day! Look for a special edition of our newsletter following the August employment report. But first, Jeff Sparshott here to take you through key developments in the global economy. Send us your questions, comments and suggestions by replying to this email.
The Tariffs and the Damage Done
Uncertainty over trade policy is likely to reduce U.S. economic output by more than 1% through early 2020. New research from the Federal Reserve is among the first by central-bank economists to attempt to quantify the effects of the recent escalation of trade-policy uncertainty during the Trump administration, Nick Timiraos reports.
- Economists documented the rise in trade-policy uncertainty with separate text analyses of newspaper articles and corporate-earnings calls. They found an initial increase in uncertainty during the first half of 2018 shaved around 0.8% from U.S. and global economic output in the first half of 2019. More recent developments are expected to reduce U.S. output by more than 1% in the first half of 2020.
- The drag on gross domestic product would have begun to ease “had trade tensions not escalated again in May and June 2019,” the economists said.
WHAT TO WATCH
U.S. nonfarm payrolls for August are expected to rise by 150,000 from a month earlier, the unemployment rate is expected to hold steady at 3.7% and average hourly wages are expected to climb 3.1% from a year earlier. (8:30 a.m. ET) Read our preview here.
Canada’s August employment report is out at 8:30 a.m. ET.
Fed Chairman Jerome Powell is in Zurich for a conversation with Swiss National Bank Chairman Thomas Jordan at 12:30 p.m. ET.
The Baker Hughes rig count is out at 1 p.m. ET.
TOP STORIES
Last Chance
Fed Chairman Jerome Powell will offer his outlook on the economy and interest rate policy Friday in Zurich. The appearance at a question-and-answer session with Thomas Jordan, head of the Swiss National Bank, will be the last opportunity to set expectations for Fed officials’ Sept. 17-18 policy meeting before their customary pre-meeting quiet period begins on Saturday. Officials cut rates a quarter point in July and are gearing up for another move, likely by the same amount, Nick Timiraos reports. The outlook has darkened recently amid escalating trade tensions, disappointing global growth and weak manufacturing data.
Service With a Smile
U.S. service-sector activity picked up in August. The Institute for Supply Management’s nonmanufacturing index offers a welcome counterpoint to a separate gauge showing a contraction in factory activity as global growth cools and trade policy generates uncertainty. Compared with manufacturing, the service sector is a much bigger chunk of the economy, more insulated from the global market and tends to be less cyclical. Taken together, the latest numbers suggest an economy that is growing, but likely more slowly. “The weighted average of the manufacturing and nonmanufacturing indices is still only at a level consistent with GDP growth of slightly less than 2% annualised,” Capital Economics’s Paul Ashworth says.
Employment in service-providing sectors accounts for about 86% of U.S. jobs and tends to rise or fall at a steadier pace than in goods-producing industries. The ISM indexes suggest service providers are creating jobs while manufacturers are trimming payrolls. Today’s jobs report should clarify the picture.
Service industries aren’t immune from disruption. Alongside auto and industrial firms, layoffs announcements this year have been especially high in retail and tech, according to executive search firm Challenger, Gray & Christmas.
So What Are the Best Jobs?
Tech, management and health-care roles are among the most promising careers of the next decade, according to a Wall Street Journal ranking of new employment-projection data released by the Labor Department. Factory jobs and other manual-labor occupations continue to have the least promising futures, Soo Oh reports.
- Many of America’s fastest-growing jobs, such as personal-care aides and fast-food workers, pay the lowest wages in the nation, while the highest-compensated professions, like doctors and lawyers, have few openings a year. Registered nurses and software developers hit the sweet spot, pairing relatively high wages with robust demand.
Everybody Hurts
Finance executives’ faith in the U.S. economy has reached a three-year low amid concerns over higher tariffs and economic uncertainty. As optimism in the economy fades, so too do expectations for revenue growth, profit growth and expansion plans, according to finance chiefs, chief executives, controllers and other accountants at companies surveyed by the Association of International Certified Professional Accountants. Forty-two percent of respondents were optimistic about the domestic economy’s outlook over the next 12 months, the lowest level since the third quarter of 2016, Mark Maurer reports.
Eurozone Growth Slows
A slump in factory output halved economic growth in the eurozone during the three months through June. The European Union’s statistics agency Friday confirmed that the eurozone economy grew at an annualized rate of 0.8% in the second quarter, down from 1.7% in the three months through March. A deepening manufacturing recession was largely behind the slowdown, with factory output down 0.8% from the first quarter, Paul Hannon reports.
That’s Gold, Jerry! Gold!
Investors are piling into precious metals at the fastest clip in years, driven by a plunge in global bond yields that has fueled a search for assets that can hold their value during troubled times. Gold purchases by everyone from central banks to retail buyers have boosted the metal to its highest level in six years, with a coterie of famous investors now touting its role as a haven from market turmoil. Silver and platinum have outpaced all other major asset classes so far in the third quarter, while palladium is up about 30% this year, Ira Iosebashvili and Amrith Ramkumar report.
WHAT ELSE WE’RE READING
The U.S. recession has arrived. “No, not that one, but a recession in U.S. company profits. As the second-quarter earnings season draws to a close, profits at U.S. blue-chips have fallen 0.3% on a per-share basis, according to FactSet data. The drop means that, following a first-quarter contraction of 0.2%, companies are officially in an ‘earnings recession’: defined as two consecutive quarters of shrinking profits,” Richard Henderson writes in the Financial Times.
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