For those of you who would prefer to listen:
Hiring in America hit stall-speed in August. Just 22K jobs were created. That was a big miss from the 77K expected. The unemployment rate remains at 4.3%.
A weakening labor market has been the driver for a potential Fed interest rate cut. That’s kept the Stock Market buoyant. Job openings fell back in July to the lowest in 10 months. The decline in available jobs was most pronounced in Health Care, Retail and Hospitality. Those last 2 industries are the most economically cyclical. Coming out of Covid, there was an abundance of jobs that could not be filled fast enough. The Health Care job drop, which had previously been a major source of new jobs this year, fell to the lowest level since 2021.
Jobs are shrinking while prices have stayed high. It’s not a good combo. The Federal Reserve’s Beige Book, a formal summary of economic conditions, recorded the weakness. It identified “flat to declining consumer spending because, for many households, wages were failing to keep up with rising prices.” That’s been a theme for a while now.
Labor Day weekend saw the lowest gas prices since 2020, at the peak of the Covid lockdown. That normally triggers increased spending in other areas. But Americans are more scrutinizing with their wallets as Summer comes to a close.
The year-end rush has already begun. The Holidays aren’t that far out. It’s looking like those stockings will be thinner this year. Americans plan to spend 5% less this Holiday Season compared to last year. That would mark the first decline since 2020. Rising costs and tariff worries are the culprit. They weigh heavily on wallets. This, according to a new PricewaterhouseCoopers survey.
Before November and December, we have to get through October. September 30th marks the end of the fiscal year for the US Government. A new spending bill is required to keep the Federal Government open. It will require bipartisan votes. That’s a seemingly impossible task. Congress has a meager 27% approval rating. Confidence is low in those elected officials getting things done. Here we go again.
A government shutdown is very possible and looking increasingly likely. Polymarket, which is active in predicting political outcomes, is pricing in a 72% probability of Congress failing to reach a deal, which would result in our Federal government shutting down in October. So there’s that.
The Market has not been focusing on the prospects of a shutdown, but it certainly will as the month marches on. None of this is surprising and fierce political divide has long been the way.
The Fed can’t escape politics, despite its constant attempts. The economic weakness will likely lead to rate cuts. Pressure is mounting. But inflation is still an issue. The Market wants a cut, not because it needs it, but as an insurance play in order to stem the recent economic weakness and accelerate growth. We think we get one in a couple weeks.
Activity in America is happening. It’s just no longer broadcasted. One area that is not showing any weakness is pro football. The NFL Season kicked off Thursday to large ratings on NBC. The Eagles defended their title against the Cowboys. It was chippy from the get-go.
The season will conclude with the Super Bowl in February at Levi’s Stadium in Santa Clara. Hotels are nearly sold out. A room at the Marriott on Union Square goes for $3K. Party venues have been secured. NBC has the broadcast rights. The network said the commercial inventory is nearly sold out already, with ads running at $7 Million per spot. The NFL was responsible for 18 of the top 20 most-watched programs last year. Advertisers covet those large live audiences.
The NFL generates over $23 Billion annually. It’s the world’s most valuable sports league. Pro football contributes $5 Billion to America’s Economy. TV and streaming rights are the biggest drivers there. In fact, the NFL produces more revenue than 60 countries around the globe. Investors are piling in.
The average value for an NFL team jumped 25% last year alone. An investor just bought a minority stake in the New York Football Giants at a valuation of $10 Billion. That’s a new high, clearly surpassing the purchase of the Washington Commanders at $6 Billion just 2 years ago.
The Dallas Cowboys were ranked the most valuable NFL franchise at $13 Billion, despite their inability to execute in the postseason for 3 decades. I couldn’t resist that jab. I’m a Niner fan. According to Forbes, the Niners are ranked 5th at $8.6 Billion. The Raiders are 9th at $7.7 Billion. Opposing fans circle Raider games for a Vegas roadtrip. There’s no Black Hole anymore. I’ve said it before and I’ll say it again: The Raiders belong in Oakland.
Back to the Market:
The record run is showing some signs of fatigue. Stocks are due for a breather. Seasonality tends to bring them. The S&P rose for a fourth straight month in August. It continues to trade at all-time highs.
September is statistically the worst month on the calendar. It’s not always down. But things are usually pretty choppy. Corrective price action has been present to start the new month. We see it continuing; Particularly if Washington becomes the focus. A Congressional fight around a shutdown would do just that. And the Market is already pricing in that Fed cut.
Have a nice weekend. We’ll be back, dark and early on Monday.
Mike
