The July employment report exceeded expectations for the number of new jobs created, with 1.76 million new jobs in the month versus 1.46 million expected. The unemployment rate fell to 10.2% from 11.1% in the prior month, while average hourly earnings increased by 4.8% year over year. The employment report was strong on the surface but also showed the continuing economic damage due to the pandemic. For example, the unemployment rate is still at a higher level than at any time during the financial crisis of 2008-09.
Attention will be focused on Washington this week as many key items will impact markets. President Trump signed several executive orders over the weekend to provide fiscal stimulus, given the impasse in Congress concerning a next-phase stimulus deal. The selection of Joe Biden’s vice presidential candidate will help shape the election in November, and I expect markets will focus more and more on the potential implications of the election.
The U.S. Treasury will auction an increasing supply of bonds across the yield curve to fund the growing U.S. deficit and push the maturity of its debt longer on the curve. The other factor impacting markets will be the continued escalation of tension and retaliatory actions between the U.S. and China.
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