{"id":194983,"date":"2023-08-17T12:30:00","date_gmt":"2023-08-17T16:30:00","guid":{"rendered":"https:\/\/ibkrcampus.com\/?p=194983"},"modified":"2023-08-17T14:23:16","modified_gmt":"2023-08-17T18:23:16","slug":"labor-market-strength-persists-while-consumers-trade-down-aug-17-2023","status":"publish","type":"post","link":"https:\/\/www.interactivebrokers.com\/campus\/traders-insight\/securities\/macro\/labor-market-strength-persists-while-consumers-trade-down-aug-17-2023\/","title":{"rendered":"Labor Market Strength Persists While Consumers Trade Down: Aug. 17, 2023"},"content":{"rendered":"\n

This morning\u2019s unemployment claims data continues to point to a tight labor market while yesterday\u2019s release of minutes from the Federal Reserve\u2019s July meeting reveals policymakers still believe considerable inflation risks exist. Labor conditions and Fed minutes underscore the possibility of an additional increase to the fed funds\u2019 rate at the November meeting while consumers who are stretched thin due to inflation and rising financing costs are increasingly seeking low-cost groceries, clothing and other items.<\/p>\n\n\n\n

In a sign of continued strength in the labor market, initial unemployment claims for the week ended August 12 fell by the most in five weeks. The 239,000 unemployment claims nearly met projections of 240,000 and is an improvement from the previous week, in which 250,000 claims were submitted. Continuing claims, which reflect the number of individuals who are still unemployed, rose to the highest level in a month. The 1.716 million claims reported throughout the week ended August 5 was higher than both the 1.7 million expected and the previous week\u2019s 1.684 million. The figure reached the highest level since the week ended July 8, in which 1.749 million continuing claims were recorded.<\/p>\n\n\n\n

\"Unemployment<\/figure>\n\n\n\n

Markets Lack Direction<\/strong><\/h2>\n\n\n\n

The investing equivalent of the August blues, which are often viewed as a monthlong version of the Sunday blues, are continuing today as equities sulk. Meanwhile, strong economic data, sticky inflation, high borrowing needs from the U.S. Treasury and the Fed\u2019s balance sheet runoff are pushing long-term yields higher. Equity players are sharpening their pencils, meanwhile, to adjust their discounted cash flow models with higher costs of capital. The result isn\u2019t motivating much incremental buying, with equity prices factoring in nirvana amidst a flat day on the heels of a pair of down days. The Nasdaq Composite Index is down 0.4%, the Dow Jones Industrial Average is up 0.1% while the S&P 500 and Russell 2000 are nearly flat. Healthcare, consumer discretionary, consumer staples, homebuilders, and technology sectors are down while all other sectors are higher. The bear-steepening is continuing across the yield curve, with long-term rates up about 4 basis points (bps) while short-term rates are down about 1 bp. The 10-year Treasury yield is up to 4.31%, looking to break the cycle high from last October at 4.34% and likely open the door to reaching the next high, which previously occurred way back in 2007. The Dollar Index is subdued alongside short-term yields with investors marching in-line of a Fed pause while they consider the possibility of a final hike in November. WTI crude oil is recovering from yesterday\u2019s sluggishness on the back of continued inventory draws in the U.S. and hopes for further stimulus from China, the world\u2019s largest energy importer. Prices are up 2% to $81.00 per barrel.<\/p>\n\n\n\n

Consumers Turn Frugal<\/strong><\/h2>\n\n\n\n

Various store operators such as Target have lowered their sales guidance for the remainder of this year as consumers tighten their spending because of inflation, higher financing costs and concerns about the economy, but Walmart and off-price retailer TJX have just upgraded their forecasts as shoppers turn to the companies\u2019 stores in pursuit of bargains. Highlights include the following:<\/p>\n\n\n\n