Labor Day is behind us and fall—usually a volatile period– is before us. The last weeks of August showed signs of optimism for the economy and as well as a rise in tensions in the Middle East.
Our first article focuses on the improving U.S. labor market. New jobless claims hit the lowest level since November, 2007. Next, the impact of Middle East tensions is examined, with particular attention to the impact on gasoline prices. And finally, a word of advice from the market strategists at Charles Schwab: “Buckle Up.”
U.S. jobless claims fell to its lowest level since November 2007. New jobless claims continue to slide lower. Based on 4-week moving average for new claims U.S. jobless claims fell in August to its lowest level since November 2007. The four-week moving average was about 5 percent lower than it was during the employment report’s survey week in July. The continuing decline in new filings for unemployment benefits offers optimism on labor market trends. An improving labor market is particularly important as the Federal Reserve “mulls plans to draw down a major economic stimulus program in which it buys long term bonds to keep borrowing costs low.”
Middle East Tensions, Oil Prices and the US Economy. “Tensions and the humanitarian disaster in much of the Middle East have continued to worsen over the last several weeks…oil prices have already jumped on concerns over military action in Syria…while it’s impossible to predict how events in the Middle East will unfold, any further escalation in violence risks taking more supply offline and driving oil prices higher…higher oil prices act as a tax on consumers in the form of higher gasoline prices…to the extent gasoline prices rise, this typically comes at the expense of discretionary purchases…the possibility of rising oil prices is a risk adding pressure on financial markets.”
Schwab Market Perspective: Buckle Up. “Stocks are experiencing our expected pullback. We believe this increase in volatility may be the start of a near-term trend where uncertainty will be elevated for several reasons. Congress comes back to Washington soon facing a battle on the debt ceiling; the implementation of the Affordable Care Act and the second round of Sequester spending cuts. Meanwhile, the Fed will also be in the spotlight with their September meeting being eyed for QE-taper possibilities, while talk of who the next Fed Chair will be is likely to intensify.”
And in case you missed it, click here to read last week’s blog post which focuses on aspects of work that are worthy of thoughtful consideration.
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J. Mark Nickell & Co.
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