Starting with the economy, the jobs report came in reasonably strong. It wasn’t super strong (which would upset the Fed), it wasn’t weak (which could signal a recession), but it was just right, slightly below expectations but still at a healthy level. The details were mixed, which was also in the just-right territory, with both the average workweek and the unemployment rate dropping. The net result was continued growth but slower, which should allow inflation to keep ticking down. The soft landing continues, which is very good news.
The other thing that happened, which wasn’t good news, was the market drop. That drop was triggered by the downgrading of U.S. debt by the Fitch Ratings agency. Fitch announced that, in its opinion, debt issued by the U.S. government was now marginally riskier than it had thought before. Fitch’s reasoning was hard to argue with—political dysfunction and rising interest rates. But the question it didn’t answer was, why now? With the economy improving, inflation declining, and a debt ceiling deal in place, things are better than they have been. Given all that, there is no real information here. Even though it did rattle markets, nothing has really changed. So, it’s not worth worrying about, which markets seem to be realizing as they bounce back to close the week.
The takeaway from this week is that, despite some market turbulence, the fundamentals remain in good shape. The economy is still growing, people are still getting jobs, and confidence remains positive. Despite the Fitch announcement, the U.S. economy continues to be at lower risk not higher, and that is a good way to start an August weekend.
Have a great one!