Cooling payrolls & huge revisions
Last Friday’s weak non-farm payrolls for the month of July followed by steep downward revisions for both May and June mark the worst three-month period since the pandemic
- Payrolls increased in July by 73’000 units, below market expectations of 103’000 with unemployment rate rising to 4.2% from 4.1% in June
- The figures for the prior two months were revised down by nearly 260’000 – following this revision, employment growth has averaged a monthly 35’000 since May
- President Trump was quick to seize the moment calling the revisions a big mistake and firing BLS Commissioner Erika McEntarfer
- The data sent a strong signal that labor market is indeed weakening, with job growth cooling, unemployment rate rising and wage gains largely stalled
Earnings Season update
Last week 4 out of the Magnificent 7 reported their results
- With the sole exception of Tesla, the published results show average earnings growth of over 20% y/y, more than double the market average, exceeding analysts’ estimates by over 12%
- To date, more than two-thirds of the companies in the S&P 500 index have published their results, showing average earnings growth of over 9%, beating analysts’ estimates by more than 8%
- Overall, 83% of S&P500 companies that have reported beat EPS estimates; Tech, Financials, and Communication Services are driving the bulk of the overall growth, while Energy, Materials, and Staples are printing negative EPS growth
Swiss to make more attractive offer
The Swiss government said it is determined to win over the US on trade after last week’s shock announcement of 39% tariffs on exports to America
- Switzerland’s trade surplus in goods with the US, partly due to its gold exports, is seen as a factor in the US decision
- Switzerland’s outsized gold exportsare partly to blame for the distorted trade balance, with billions of dollars worth of gold constantly flowing into and out of the nation; Pharmaceuticals, coffee and watchesare the other main drivers
Now that’s one big dam…
Last week Beijing announced the beginning of construction of a massive $167 billion hydropower dam in Tibet in an attempt to revive China’s economy and tighten control over a restive region
- The project will require 60 times the cement of the Hoover Dam, more steel than 116 Empire State Buildings and enough concrete to build a two lane highway around the Earth 5 times
- According to analysts the project may drive 3 trillion yuan in total investments over the next 10-15 years (about 2.2% of last year’s GDP) exceeding the most recent major stimulus efforts such as 2023 mid-year budget revision
- Once finalized the dam could generate each year roughly the UK’s annual electricity use – boosting Chinese GDP by 0.1% to 0.2% per year and cutting the dependence on coal and other fossil fuels
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