Analysis and Opinion »

Sentiment Slows as Jobless Rate Increases

David Becker
Share on StockTwits
Published on
www.iforex.com

The July Michigan sentiment declined to 81.8 from 82.5 following Friday’s increase in the July employment rate. Michigan sentiment remains below the 85.1 cycle-high from July of 2013. The average size of the monthly boost has dissipated to 0.7 this year from a larger 1.8 average in 2013. Michigan sentiment has enjoyed a 2014 lift from rising stock prices and home price gains, though confidence faces a headwind from limited credit availability, mortgage rate increases, disruptions from Obamacare, and a deteriorating geopolitical backdrop.

Confidence continues to underperform consumption and payrolls. The July declines in most confidence indicators have fluctuated around mid-2013 levels, though the consumer confidence index defied the pattern with a rise to a cycle-high 90.9 from an 86.4 in June, versus last year’s temporary June peak of 82.1.

In Friday’s jobs report there was a shortfall in hours-worked for the goods sector and hourly earnings were flat. Civilian employment rose by a modest 131k in July while the labor force surged by 329k to leave a jobless rate climb to 6.20% from a cycle-low 6. climbed a solid 58k in July, with gains of 28k for manufacturing, 8k for mining, and 22k for construction. There was a flat hours-worked figure for the goods sector, with a 0.9% rise for construction, but declines of 0.2% for factories and 0.2% for mining.

Based on Friday’s report, the Fed will not be rushing to the as the mixed news will likely keep policy accommodative until the middle of 2015. While some economic reports are showing solid results, the economy and sentiment continue to fluctuate in a range that could be considered tenuous.

Share on StockTwits