Weekly economic & financial commentary

Summary

United States: Supply Problem Derails August Jobs Report

• The 235K jobs added in August was about half a million jobs short of expectations. For financial markets, which were hanging on every indication of the labor market as a clue to eventual Fed tapering, this report did not shout "substantial further progress." Other economic indicators this week were emblematic of the crosscurrents confronting the U.S. economy as it transitions from the vaccine- & stimulus-fueled surge in activity earlier in the year to a yet-to-be-determined new normal.
• Next week: JOLTS (Wed), PPI (Fri)

International: COVID Shows Up in GDP Data and China PMIs Disappoint

• Both Canadian and Indian GDP data revealed just how much of an economic impact COVID had in the second quarter of this year. The Canadian economy unexpectedly contracted in Q2 on an annualized basis, while the sharp spike in infections resulted in another significant quarterly contraction in India. COVID restrictions also played a role in uninspiring August PMI data in China.
• Next week: Reserve Bank of Australia (Tues), Bank of Canada (Wed), European Central Bank (Thurs)

Interest Rate Watch: Summer Doldrums for U.S. Interest Rates

• Despite plenty of headlines related to COVID, monetary and fiscal policy and incoming economic data, U.S. Treasury yields have moved very little over the past month. The 10-year Treasury yield spent most of the month of August anchored around 1.30%, and despite a disappointing nonfarm payrolls number this morning, the 10-year yield is up a few basis points and currently sits at 1.33%.

Topic of the Week: Hurricane Ida Rains Over the East

• The cruel indifference of Mother Nature was on full display this week. While much of the West continues to battle droughts and wildfires, Hurricane Ida dumped massive amounts of rainfall on large swathes of the East. The potential negative economic impacts extend to both the local and broader U.S. economy.

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