The NFIB Small Business Optimism Index ticked up in August, above the 52-year average level. “Optimism increased slightly in August with more owners reporting stronger sales expectations and improved earnings,” said NFIB Chief Economist Bill Dunkelberg. “While owners have cited an improvement in overall business health, labor quality remained the top issue on Main Street.”
If global markets flatlined at current prices through New Year’s Eve, the results would go into the history books indicating a solid, widespread bull run for 2025. The question is whether the priced-for-perfection state of affairs will endure through the fourth quarter?
US non-farm payrolls posted a weak increase in August, well below expectations. The tepid rise fueled concerns that the economy is slowing and so the Federal Reserve is likely to cut interest rates at its Sep. 17 monetary policy meeting. “The job market is stalling short of the runway,” said Daniel Zhao, chief economist at jobs site Glassdoor. “The labor market is losing lift, and August’s report, along with downward revisions, suggests we’re heading into turbulence without the soft landing achieved.”
● The Fractured Age: How the Return of Geopolitics Will Splinter the Global Economy
Neil Shearing
Interview with author via Financial Times
It’s a widely held assumption that US President Donald Trump has put globalization into reverse. But Neil Shearing, group chief economist at Capital Economics and author of The Fractured Age: How the Return of Geopolitics Will Splinter the Global Economy, tells the FT’s world trade editor Peter Foster that Trump’s policies are a symptom and not the cause of the global trading system unravelling. They discuss how economic rivalry between the US and China is reshaping world trade – and where it might lead.
The short answer: Yes, it appears to be. The somewhat longer answer: Yes, but (you knew this was coming) a number of indicators have been advising no less over the summer, and yet the market has continued to climb. Short-term timing decisions, in other words, remain as fraught as ever. But let’s press on anyway and consider some of the clues that imply the market is toppy.
Hiring at US companies slowed to 73,000 in August, below expectations. “The year started with strong job growth, but that momentum has been whipsawed by uncertainty,” said Dr. Nela Richardson, chief economist, ADP. “A variety of things could explain the hiring slowdown, including labor shortages, skittish consumers, and AI disruptions.”
The US economy remains on track to post a moderate downshift in growth in next month’s third-quarter GDP report, based on the median estimate for a set of nowcasts compiled by CapitalSpectator.com.
US job openings fell in July, dropping to a level that’s close to a 4-1/2 year low and fueling expectations that the labor market is cooling. The report strengthened forecasts that the Federal Reserve would cut interest rates at its upcoming policy meeting on Sep. 17. “This is a turning point for the labor market,” said Heather Long, chief economist at Navy Federal Credit Union. “It’s yet another crack.”
The long-run expected total return for the Global Market Index (GMI) continued to hold in the low-7% range in August, based on the average for three models (defined below). The expected performance remains well below the trailing 10-year return for GMI, a market-value weighted mix of the major asset classes (excluding cash).
US manufacturing activity contracted for sixth straight month in August, based on the ISM Manufacturing Index. One bright spot: the new orders component improved to 51.4 last month, reflecting a modest growth rate. “I continue to see the broad economy generally and the manufacturing sector in particular as in a holding pattern until tariff-related uncertainty recedes,” said Stephen Stanley, chief U.S. economist at Santander U.S. Capital Markets.
