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Weekly economic review & outlook
A big, if mixed, week for the economy and markets

AUG. 05, 2019

You Need to Know

Week in review

The Fed cut rates, but increased uncertainty about future moves

The Fed cut rates by 25 bps and stopped quantitative tightening early, but Chair Powell’s comments increased uncertainty about future moves.

Moderate employment gains as manufacturing activity waned

Job gains of 164,000 pushed underemployment to a 19-year low as the manufacturing expansion waned.

Week Ahead

Forecasts

Service sector moving ahead smartly

While we expect the ISM non-manufacturing index to slip a tad, it should still be at a level showing solid growth for this large part of the economy.

Unemployment claims still point to a tight job market

Surveys continue to show that one of the biggest problems facing firms is a lack of qualified workers – suggesting that unemployment claims will remain low.

As expected, the Fed cut the target range for the federal funds rate. But there were lots of unexpected crosscurrents. First, the Fed also stopped its quantitative tightening (QT) program two months early. Second, the Fed only cut by 25 bps, not the 50 that many market participants hoped for. And third, Chair Powell noted that this was more of a mid-cycle insurance cut rather than the start of an easing cycle as might occur at the start of an economic downturn.

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