Hiring hits a snag! 🚧 Jobs added in July fell short, but there’s a twist—unemployment rate jumps to 4.3%! 📉

Hiring Slows, Unemployment Rises

The Labor Department reported a slowdown in hiring to 114,000 jobs last month, with the unemployment rate rising to 4.3%. Despite job additions, the labor market shows signs of weakening. Average hourly earnings increased by 3.6% in July, the smallest gain since May 2021. May and June job counts were revised down by 29,000. The labor-force participation rate increased slightly to 62.7%. The Federal Reserve, aiming to prevent significant joblessness, has indicated a potential interest rate cut in September. Hurricane Beryl’s impact might have reduced July’s job count by 20,000 to 30,000. Other labor market indicators, such as the hires rate, are also signaling caution, with the hires rate at its lowest since April 2020.

A Declining Momentum in Job Creation

While the U.S. continues to see job additions, the momentum has been steadily declining. The recent report adds to growing evidence that the labor market’s robust performance may be waning. Notably, average hourly earnings increased by 3.6% in July compared to the previous year. Although this rise surpasses the current inflation rate, it marks the smallest wage gain since May 2021. Furthermore, job counts for May and June were revised down by a combined 29,000, signaling a potential slowdown.

Labor Force Participation and Unemployment Dynamics

The labor-force participation rate, which measures the percentage of working-age individuals who are either employed or actively seeking employment, edged up to 62.7% in July from 62.6% in June. This slight increase in participation partly explains the rise in the unemployment rate, as more individuals entered the labor market. However, this uptick in participation did not translate into significant job growth, contributing to the overall cooling trend.

Federal Reserve’s Stance on Interest Rates

The Federal Reserve, in light of these developments, has indicated a possible interest-rate cut in September. Fed Chair Jerome Powell emphasized the importance of avoiding a significant rise in joblessness, stating, “I would not like to see material further cooling in the labor market.” This perspective underscores the delicate balance the Fed aims to maintain between controlling inflation and supporting employment.

Impact of Hurricane Beryl

The slowdown in job creation last month might also reflect the impact of Hurricane Beryl, which made landfall in Texas on July 8. The storm’s timing coincided with the Labor Department’s employment readings for the week, potentially distorting the data. Economists at JPMorgan Chase had estimated that Beryl could reduce July’s job count by 20,000 to 30,000, with an anticipated rebound in August. The hurricane’s aftermath saw a notable increase in initial claims for unemployment insurance in Texas, further complicating the labor market picture.

Warning Signs from Other Labor Market Indicators

Beyond the headline figures, other labor market measures are signaling potential trouble. The Labor Department reported that the hires rate—the number of hires as a share of total jobs—slipped to 3.4% in June, its lowest level since April 2020, when the pandemic first struck the economy. In comparison, the hires rate averaged 3.9% in 2019. Despite the low hires rate, the economy has managed to add jobs, partly due to muted layoff activity, with the June layoff rate matching its lowest level on record.

Insights:

1. Hiring slowed significantly, missing expectations.
2. The unemployment rate increased to 4.3%.
3. Average hourly earnings growth was the smallest since May 2021.
4. Labor-force participation rose slightly.
5. The Federal Reserve is considering a September interest rate cut.
6. Hurricane Beryl impacted July’s job count.
7. The hires rate is at its lowest since the pandemic began.

The Essence (80/20)The Origins and Evolution of the 80/20 Principle The Discovery by Vilfredo Pareto In 1897, Italian economist Vilfredo Pareto uncovered a striking pattern in his study of wealth and... More:

• Core Topics:
  • Hiring Slowdown: Job growth missed expectations with only 114,000 jobs added.
  • Unemployment Rate: An increase to 4.3% highlights potential labor market weakness.
  • Earnings Growth: Average hourly earnings grew by 3.6%, the smallest gain since May 2021.
  • Federal Reserve Actions: Considering a rate cut to prevent joblessness.
  • External Factors: Hurricane Beryl affected job numbers.
  • Labor Market Indicators: Low hires rate and low layoff activity.

The Guerilla Stock Trading Action Plan:

1. Monitor Labor Market Trends: Keep a close watch on hiring, unemployment rates, and earnings growth to identify signs of economic weakening.
2. Prepare for Economic Shifts: Businesses and policymakers should plan for potential adjustments in workforce and financial strategies in response to labor market data.
3. Federal Reserve Policies: Stay informed about Federal Reserve decisions on interest rates, as these will impact economic conditions.

Blind Spot:

Long-Term Impact of Natural Disasters: The temporary effects of events like Hurricane Beryl on labor statistics may obscure underlying trends, necessitating cautious interpretation of monthly data.

SPY Technical Analysis Daily Time Frame

In the daily time frame for the S&P 500 SPDR (SPY), the following analysis can be made:

Price Movement: The SPY has experienced a decline, closing at $530.57, down $12.44 for the day. This price is below the 50-day moving average (MA) of $546.13, indicating potential short-term weakness. However, it is still above the 200-day MA of $501.49, suggesting long-term support remains intact.

Volume: The trading volume is relatively high at 1.45 million, indicating increased selling pressure.

Relative Strength IndexIn the world of technical analysis, the Relative Strength Index (RSI) stands as a cornerstone tool for traders seeking insights into market momentum. Developed by J. Welles Wilder ... More (RSI): The RSI is at 37.34, which is approaching the oversold territory (below 30), suggesting the possibility of a short-term rebound or consolidation.

On Balance VolumeThe On Balance Volume indicator (OBV) is a technical analysis tool used to measure the flow of money into and out of a security over a specified period of time. It is a cumulative ... More (OBV): The OBV is showing a negative trend at -1.51 billion, indicating that the selling pressure outweighs buying pressure over the observed period.

Stochastic RSIIn the realm of technical analysis, the Stochastic RSI (StochRSI) emerges as a powerful tool for traders seeking to navigate market dynamics with precision. Developed by Tushar S. ... More: The Stochastic RSI is at 0.000, indicating that the SPY is in an extremely oversold condition, which could imply a potential for a short-term reversal.

Chaikin OscillatorNamed after its creator Marc Chaikin, the Chaikin Oscillator stands as a formidable tool in the arsenal of technical analysts. This oscillator is designed to measure the accumulati... More: The Chaikin Oscillator is at -51.5 million, indicating significant distribution and further confirming bearish momentum.

MACDThe MACD indicator is essentially a momentum indicator that shows the relationship between two different moving averages of price. The MACD is the difference between the 12-period ... More: The MACD line is at -4.89, with a signal line at 0.68, and a histogram showing a negative value of -5.57. This indicates that the momentum is strongly bearish.

Time-Frame Signals:
3 Months: Hold. The stock shows signs of being oversold, which could lead to a short-term rebound, but current bearish indicators suggest caution.
6 Months: Hold. While the long-term 200-day MA support is still in place, the current bearish momentum and negative volume trends suggest waiting for more stability.
12 Months: Buy. The long-term outlook remains positive as the price is still above the 200-day MA. Potential for recovery once the current downtrend stabilizes.

SPY Technical Analysis Weekly Time Frame

Analyzing the weekly chart of the S&P 500 SPDR (SPY), several key trends and indicators are evident.

The major trend over the past year has been upward, with a clear rise in prices from the end of 2022 to mid-2024. This uptrend is characterized by higher highs and higher lows. However, recent price action shows a pullback from its peak around $550 to the current level of $530.47.

Support and resistance levels can be identified at approximately $460 (support) and $550 (resistance). The anchored VWAP from September 2022 sits at $441.06, providing a long-term support level.

Volume analysis shows a mixed picture, with spikes in volume corresponding to both upward and downward price movements. The On Balance Volume (OBV) indicator has been rising steadily, suggesting accumulation.

The Relative Strength Index (RSI) at 55.14 indicates that the stock is in the neutral zone but leaning towards being overbought. A recent decline in RSI from above 70 suggests a potential bearish divergence.

The Stochastic RSI has recently dipped to zero, signaling oversold conditions, which might suggest a short-term rebound.

The Chaikin Oscillator, at -11.35M, indicates selling pressure, aligning with the recent price pullback.

The MACD Oscillator shows a recent bearish crossover, with the MACD line at 14.80 and the signal line at 16.15. This suggests that downward momentum might continue in the short term.

Time-Frame Signals:

For the 1-year time frame, the current pullback after a significant uptrend suggests a “Hold.” If the price stabilizes around the support levels, it could provide a buying opportunity.

For the 2-year time frame, the overall uptrend and strong accumulation signal a “Buy.” The recent pullback could be seen as a healthy correction within a longer-term uptrend.

For the 3-year time frame, the long-term upward trajectory and consistent higher lows suggest a “Buy.” The anchored VWAP and historical support levels provide confidence in the long-term growth potential.

Past performance is not an indication of future results, and this article should not be considered as investment advice. Always conduct your own research and consider consulting with a financial advisor before making any investment decisions. 🧡

Looking Ahead

The latest jobs report paints a picture of a labor market at a crossroads. While job growth continues, the pace is slowing, and the rise in unemployment indicates potential underlying weaknesses. The Federal Reserve’s cautious approach to interest rates reflects concerns about further cooling in the labor market. Meanwhile, external factors like Hurricane Beryl have added noise to the data, making it challenging to discern the true state of the labor market.

As the economy navigates these complexities, the coming months will be crucial in determining whether the labor market can regain its momentum or if the current slowdown signals a more prolonged period of weakness. Policymakers, businesses, and workers alike will be closely watching the next set of employment figures, hoping for clearer signs of recovery or stabilization in the labor market.