Friday was a great day for the markets. The trade tariffs were enacted but the market was up thanks to a good jobs number. There were 213,000 jobs created last month. Also, the unemployment rate actually rose to 4%. However, this is not necessarily a bad thing. More than 600,000 Americans have come back into the workforce. This is wonderful for a mature business cycle and shows people are confident in the economy. Earnings season should kick into gear this week. As long as the domestic economy remains strong and earnings continue to come in positive, it should outweigh any trade war talks.
One of the things we are watching with the jobs numbers is that wages don’t seem to be rising at a rate one might expect. We have only seen, year over year, a 2.7% increase in wages. This is almost right in line with costs. Wages can’t increase faster than costs which limits the next leg in this economy. People are making as well as spending more money. As unemployment is dropping, we are watching to see if money will make its way back into employees’ pockets.
Bank growth, year over year, was very good for the second quarter, up 5.5%. This percentage is significantly better than the end of 2017 in which it was at 1%. Small banks and mid-size banks are lending to smaller companies. Companies are buying equipment which means that the appreciation portion of the tax reform is kicking in. Also, they are using lines of credit to acquire people. This suggests that owner managed businesses are showing confidence.
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