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Clarksville, TN – The May Employment Report was generally disappointing. Nonfarm payrolls rose by 138,000 (median forecast: +185,000), while figures for March and April were revised a net 66,000 lower.
Retail payrolls fell for the fourth consecutive month (down more than 80,000 since January, which is more than the total number of coal miners). The unemployment rate dipped to 4.3%, a 16-year low, partly reflecting a sharp drop in the rate for young adults (which could reflect a seasonal adjustment issue, although the trend is clearly lower).Average hourly earnings rose 0.2%, up 2.5% from a year ago (higher than a couple of years ago, but well below the pace we would normally see in such a tight job market).
The report was seen as consistent with another Fed rate increase on June 14th (federal funds futures are suggesting about an 85% chance of a June hike).
The week’s other economic reports were mixed. Unit auto sales fell in May (leaving many dealers with an uncomfortably high level of inventories). The ISM Manufacturing Index was essentially unchanged.
Comments from two Federal Reserve governors boosted the likelihood of a mid-June rate hike. President Trump pulled the U.S. out of the non-binding Paris Climate Agreement (effective late 2020), which should have no immediate impact on the prospects for U.S. growth.
Next week, the economic calendar is thin. The ISM Non-Manufacturing Index has some potential to surprise, but is unlikely to add much to the overall picture. Things will heat up again in the following week, where the focus will be clearly on the Fed.
Consumer Money Rates
Treasury Yield Curve – 06/02/2017
As of close of business 06/01/2017
S&P Sector Performance (YTD) – 06/02/2017
As of close of business 06/01/2017
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Tax Equiv Muni yields (TEY) assume a 35% tax rate on triple-A rated, tax-exempt insured revenue bonds.
The information contained herein has been obtained from sources considered reliable, but we do not guarantee that the foregoing material is accurate or complete. Data source: Bloomberg, as of close of business June 1st, 2017.
Frazier Allen, WMS, CRPS, Financial Advisor with F&M Bank
Web Site: http://www.raymondjames.com/frazierallen
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