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Weekly Market Summary
Sep 5 to Sep 8, 2023
Extra Credit*
- The labor market data reported this week continued to indicate strong hiring despite softening in labor demand. Nonfarm payrolls increased by 187,000 in August, bringing the three-month average gain to 150,000. The unemployment rate jumped to 3.8% in August. Also, the labor supply improved further in August, with the overall participation rate reaching its post-pandemic peak (62.8%) and prime-age participation hovering around its highest level in two decades (83.5%). This continued improvement seems to have kept wage pressures at bay. Average hourly earnings increased only 0.2% last month, the lowest sequential increase since February 2022, bringing the year-ago gain down to 4.3%.
- The odds for the Federal Reserve achieving a soft landing increased last week, partly due to the August employment report. An increase in labor supply more than matched the strength in demand, helping to push the unemployment rate up three-tenths to 3.8%, the highest since February 2022.
- Policymakers want better alignment between labor supply and labor demand in large part to make sure that inflation will head back down to the Fed’s 2% target. Overall, the July Personal Consumption Expenditures (PCE) Price Index showed inflation downshifting. In the July data, the headline PCE Price Index rose 0.2%, while the core PCE Price Index also increased 0.2%. There was a 2.5% jump in prices for financial services in July, which helped generate a 0.5% gain for the aggregate related to core services, excluding housing. But the market-based PCE Price Index measures looked much softer in July and generally have been modest in recent months. Both the market-based PCE Price Index and the related core measure rose just 0.1% in July.
- The trailing 12-month default rates for bank loans and high-yield bonds, excluding distressed exchanges, finished the month at 2.24% and 1.29%, respectively, down from 2.33% and 1.18% from July. The long-term historical default rate for loans and high-yield bonds is 3.1% and 3.2%, respectively.
Sources: Bloomberg and JP Morgan as of 9/6/23.
Previous reports
*Source: Morningstar®, Bloomberg, Credit Suisse. OAS is Options Adjusted Spread. 4-year discount margin is used for spread for bank loans. Yield quoted is yield-to-worst or equivalent calculation. YTD Low / High for yields are based on end of week and not intraday movements. Indexes and sub-indexes: Investment-grade corporates represented by Bloomberg US Corporate Bond Index. High-yield bonds represented by Bloomberg US Corporate High Yield Index. Bank loans represented by Credit Suisse Leverage Loan Index. The red and green arrows depicted under Yields, Option Adjusted Spreads, and Prices indicate a higher or lower value from the previous week.
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