WEEK IN REVIEW "Syria and The Jobs Numbers"

THE WEEK IN REVIEW

Anxiety over a possible US attack on Syria led to volatility in an otherwise quiet week. Inconsistent economic data caused more uncertainty over whether the US Federal Reserve will begin to reduce its stimulus program later this month. The US economy added fewer jobs than expected in August, but the latest weekly jobless claims were at a multiyear low. The pace of growth in US services and manufacturing accelerated in August. The latest data from Europe confirmed the initial report that the eurozone economy grew in the second quarter after an 18-month contraction. However, European Central Bank President Mario Draghi remained cautious.

A handful of large companies announced mergers and acquisitions. Microsoft will team up with Nokia to try to stake out some territory in the critically important mobile communications market, and Verizon is buying out its partner Vodafone to establish a more dominant position in the US wireless industry. For the week, major global stock indices rose overall and the yield on the 10-year US Treasury note topped 3% for the first time since July 2011 before a sharp drop in response to Friday’s weak jobs report.

Slightly fewer jobs than expected were added to US payrolls in August, and the July employment number was revised sharply downward. This caused investors to dial back expectations that the Fed will begin to reduce its bond-buying stimulus program this month. The 169,000 new jobs in August fell short of economists’ consensus forecasts of 175,000 to 180,000. The unemployment rate fell to 7.3%, as fewer people sought work. More dramatically, the July new jobs total was revised down to 104,000 from 162,000. In contrast, weekly US initial unemployment claims fell by 9,000 to 323,000 for the week ended 31 August, and the rolling four-week average fell by 3,000 to 328,500, the lowest level since October 2007.

US auto sales accelerated in August to a level last seen in May 2007. All major automakers did well, with General Motors, Ford Motor and Chrysler Group all logging double-digit sales growth. Japanese automakers did even better, with Toyota Motor’s sales surging 23%, Honda Motor’s vehicle sales rising 27% above their year-earlier level and Nissan posting a 22% sales gain. Total US auto sales were higher than in any month in more than six years.

After an unexpectedly sharp narrowing in June, the US trade gap grew by 13.3% in July, to $39.2 billion. US imports grew 1.6% in July and exports fell 0.6%, the US Department of Commerce reported. While US demand for foreign goods –– including automobiles, industrial supplies, consumer goods and food –– remains strong, weaker global demand continues to weigh on exports.

Updated figures for the Eurozone’s second-quarter gross domestic product confirmed the earlier estimate of a 0.3% expansion. Continued growth in the third quarter is likely based on the Eurozone composite purchasing managers’ index, which rose to 51.5 in August from 50.5 in July. Anything above 50 indicates growth. However, European Central Bank President Mario Draghi played down the signs of recovery, stating that interest rates will remain at their current low levels for an extended period.

Greece’s six-year recession continued in the second quarter, but its annualized rate of contraction, 3.8%, was less severe than an earlier-reported 4.6% decrease in activity. The reading was the least negative for Greece in three years.