Unfortunately, as a result of the continuing U.S. government shutdown, we have lost this basic but highly awaited monthly employment report. This cancellation is injecting unprecedented uncertainty into already tenuous economic forecasts. This disruption comes as the Federal Reserve adopts a more dovish stance prompted by a recent slowdown in job growth. The move serves to underscore mounting global economic woes that are weighing heavy on markets here and around the world.
The employment situation report is one of the most important barometers we have on the health of the U.S. job market. Without it, there is tremendous doubt cast on economic projections. Analysts say that the Fed’s decision to take a more dovish tack reflects a recognition of increasing risks to the employment picture. In fact, they point to the current economic recession—especially a collapse in wage growth—as the biggest reason behind this shift.
Later today, the Institute for Supply Management (ISM) will be releasing the services Purchasing Managers’ Index (PMI). This announcement was made in concert with the national employment report released Friday. Economists predict this report to show continuing strong momentum in the services sector, even with continued inflationary forces at work. The importance of the services sector to the U.S. economy generally cannot be overstated. Ensuring stability in this sector is critically important to our national economic recovery.
Inflation in the services sector, in particular, is the major obstacle. With ever-increasing expenses creating a perfect storm of hardship within the U.S. At the same time, the United Kingdom is having a hard time reining in inflation for its services sector. Falling PMI across the UK has been largely driven by weakness in new orders, output and employment. With non-assets prices in the services sector continuing to be quite high, fears that we may be heading toward a long-term economic malaise grow.
European stocks—and particularly travel and leisure equities—began the last trading day of the week on an upswing. Today, all of the major markets opened in positive territory. This positive momentum could be an indication of growing investor confidence, even against a difficult global economic landscape.
Not all sectors are experiencing growth. West Texas Intermediate (WTI) crude oil prices are on track for their biggest weekly drop since June. This decrease is largely the result of a combination of positive factors. On the bearish side, Kurdish oil exports have just resumed, as we reported. This new trend is made worse by growing production from OPEC. Though observers generally expect a June OPEC+ meeting to approve more output increases, the additional supply is likely to deepen existing price declines.
With oil prices sinking to a four month low, the market is on high alert. This combination of increasing supply and moderated, weak demand points to increasing headwinds for the world’s energy markets.