Our three main points this month include a look at:
- the overall market
- the jobs market
- and the possible effects and influences on the economy after Hurricane Harvey hit the Texas coast. Harvey was a catastrophic storm that made landfall on August 25th, causing fatalities and massive flooding in Houston and the surrounding areas.
First, let’s briefly review how the overall market looked for August.
Wall Street closed higher at the end of August as investors reacted to economic data and held on to guarded anticipation of Washington’s promise for specifics on a tax-reform plan. Government officials have said President Trump’s administration is on track to implement tax reform by the end of the year.
U.S. stocks advanced on the last day of August with main indexes posting their fifth consecutive monthly gain. The S&P 500 finished in positive territory. Since the beginning of the year, the S&P has climbed 10.5% while tech-heavy Nasdaq surged 19%. In an atmosphere in which the economy and earnings continue to grow, markets will also climb. You will notice we did not spend any time on geopolitical events because the markets did not appear to either. This is typical because while geopolitical events can shake up markets from time to time, they usually do not have a long-term influence.
Let’s shift now to the jobs market.
As the hiring pace decelerated in August, employers still added 156,000 jobs. In addition, the unemployment rate has risen slightly to 4.4%, from its 16-year low of 4.3%. This rate is still considered by most economists as at or near full employment. Additionally there was continued slow growth in wages with the average hourly wage increasing just a few pennies. We will have to watch and see how Hurricane Harvey impacts the labor market.
Speaking of Hurricane Harvey, let’s discuss how Harvey has affected our economy so far, and what it may cause down the road.
At least 10 oil refineries in Texas have been shut down because of Hurricane Harvey. Combined, these plants are able to refine as many as 2.2 million barrels of oil a day. Harvey has brought record flooding to the oil heartland of Texas, and paralyzed a quarter of the U.S. refining industry, and this has caused oil prices to fall due to a lack of demand for raw crude from the refineries.
Conversely, U.S. gasoline prices have risen substantially due to the forced closures of these refineries. The government has tapped an emergency stockpile, and a European flotilla was on its way to the U.S. just after the storm with millions of gallons of gasoline—these efforts hopefully will prevent prices from spiking further.
As for the job market, Hurricane Harvey has shut down most business in metropolitan Houston, but the storm had no impact on the August job reading. The department collected its data before the storm’s landfall. Harvey could show a negative impact on the September jobs report, if businesses in that region are still closed in mid-September, when they collect data. However, the storm might give an employment lift when cleanup and reconstruction begin.
Overall the economy and the markets remained strong. That’s it for the September educational economic update. As always, if you have questions or concerns about what we have discussed, please call our office.
Disclosure: While we believe the information in this report is reliable, we cannot guarantee its accuracy. Opinions expressed are subject to change without notice and are not intended as investment advice or a solicitation for the purchase or sale of any security. Please consult your financial professional before making any investment decision. Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining markets. The indices mentioned are unmanaged and cannot be invested into directly. Past performance does not guarantee future results.