Daily Financial Commentary

    

09/03/2010

Not a bad overall week for the economy.

The Dow continues to post gains as positive results from manufacturing, home sales, and now private employment help to temper concern than the recovery is faltering. Hiring by private companies in the US jumped by 67,000, higher than the expected consensus of 40,000. A greater than forecasted increase in wages also provided a confidence boost. Overall employment dropped for the third straight month, as government payrolls fell by 121,000, still reflecting the layoffs of temporary census workers.

The unemployment rate climbed slightly, to 9.6% as more workers entered the workplace. Today’s numbers further ease concerns that the economy is leaning towards falling back into recession, but it is important to remember that overall growth remains soft. The private sector however is appearing to weather better than expected, and today’s surprising gains may even moderate the odds of further quantitative easing from the Fed.

Initial equity gains were curbed by the ISM survey of non-manufacturing business, showing that service companies expanded at a slower pace than expected in August. The gauge, which covers around 90 percent of the economy, dropped to 51.5 for August from 54.3 from July.

Stocks are up; bonds are down heading into the long weekend. Treasury yields as of 10:45 am EST are as follows:  2-year note 0.51%; 3-year note 0.78%; 5-year note 1.48%, 10-year note 2.70%, and the 30-year bond 3.79%.

Joshua Becker
Associate Director, Risk Analyst – CU ISI