Market Minute
August 2024 – By Scott Rosenquist CFA®
Employment data for the month of July came in below expectations with 114,000 jobs added while the unemployment rate moved higher to 4.3% from 4.1% in the previous month. This is the fourth month in a row showing a higher unemployment rate although it is coming off a historically low base. The weak report raised questions about the strength of the economy and what it may mean for future monetary policy decisions. It is important to note that monthly economic reports are subject to revision and can be volatile month to month.
During last month’s post-Federal Reserve meeting press conference, Fed Chair Powell highlighted the fact the Committee remains data dependent and not data point dependent when determining future policy. Inflation was the main priority post pandemic for policy makers and that is now shifting more towards their dual mandate for both price stability and full employment. Powell also stated he would not like to see material further weakening in the labor market. The unemployment rate is now above the Federal Reserve’s projections for year-end.
It looks like financial markets are trying to price how many rate cuts the Federal Reserve will ultimately do and that has been reflected in the recent volatility of Treasury yields. While economic data has shown signs of slowing, the Federal Reserve has ample room to ease financial conditions if necessary. For investors with large cash positions in excess of any immediate or near-term liquidity needs, this serves as a reminder to review and invest excess cash for the long term.
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