* Will a strong job market immunize the US from recession? Maybe not
* China Composite PMI, a GDP proxy, indicates Aug growth slowest since Jan
* China’s Country Garden, a property developer, avoids default–again
* Eurozone economy contracts at faster pace in August via PMI survey data
* Modest global mfg contraction continued in August via PMI survey data
* US manufacturing activity contracted for 10th straight month in August
* US payrolls rose more than forecast in August
* Economists expect US economic growth will slow in 2024:

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The Capital Spectator never argues with long holiday weekends, and this Labor Day is no exception. The wheels for the machinery start turning again on Tuesday, Sep. 5. Meanwhile, Sophocles comes to mind: “Without labor nothing prospers.”

Cash led the performance race in August for the major asset classes, based on a set of proxy ETFs. In fact, most markets posted losses last month. The handful of winners, in addition to cash: a broad measure of commodities and US junk bonds.

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* US consumer spending accelerated in July
* Slowing sales at Dollar General suggest softer US consumer spending ahead
* Eurozone manufacturing PMI reflects “steepening downturn in August”
* China’s economic headwinds may be linked to the ‘paradox of thrift’
* China Manufacturing PMI shows stronger operating conditions in August
* US mortgage rates ease after 5 weeks of climbing
* US jobless claims eased last week, remaining near multi-decade low
* Chicago PMI survey data continues to indicate contracting mfg activity in August
* US PCE inflation edges up for 1-year change through July:

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Predicting Financial Crises: The Role of Asset Prices
Tristan Hennig (International Monetary Fund), et al.
August 2023
We explore the early warning properties of a composite indicator which summarizes signals from a range of asset price growth and asset price volatility indicators to capture mispricing of risk in asset markets. Using a quarterly panel of 108 advanced and emerging economies over 1995-2017, we show that the combination of rapid asset price growth and low asset price volatility is a good predictor of future financial crises. Elevated levels of our indicator significantly increase the probability of entering a crisis within the next three years relative to normal times when the indicator is not elevated. The indicator outperforms credit-based early warning metrics, a result robust to prediction horizons, methodological choices, and income groups. Our results are consistent with the idea that measures based on asset prices can offer critical information about systemic risk levels to policymakers.

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* US GDP for Q2 revised down to +2.1% from +2.4%
* China manufacturing sector contracts 5th month in August via PMI survey
* One of China’s biggest property developers warns of possible default on debt
* Eurozone inflation is higher than expected in August
* US pending home sales in July post gain for second straight month
* Hiring by US companies slows sharply in August via ADP data:

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Nothing lasts forever, as any student of the business cycle knows. But recognizing that the economy is dynamic, and constantly shape shifting, doesn’t make it any easier to spot trend changes in real time.

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* Some House members flirt with possibility of a US government shutdown
* US firms complain China is ‘uninvestable’, says US commerce secretary
* Peak China may be shaping up to be a key challenge for US
* Home prices in US rose for fifth straight month in June
* US court clears path for first US-listed spot bitcoin ETF
* US Consumer Confidence Index declined in August after two month gains
* US job openings fall in June to lowest level since March 2021:

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Last week I briefly profiled the earnings yield as a tool for estimating the US stock market’s equity risk premium, the return on stocks over a “risk-free” rate. For comparison, let’s add the dividend yield model (DYM) in today’s update.

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* US and China agree to take steps to ease trade tensions
* China vows to speed up fiscal spending to support slowing economy
* Is geothermal the next big thing for US energy?
* German economy appears to be sliding into stagnation
* Goldman Sachs sells investment advisory business to Creative Planning
* Texas mfg production activity in Aug contracts at deepest level in 3 years:

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