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Have Tariffs Started Taking a Toll on US Businesses?

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US job additions beat expectations

The US (IVV)(QQQ) employment data for August was released on September 7. After disappointing in July, the job additions in August rebounded to 201,000 compared to economists’ expectations of 191,000 and last month’s additions of 147,000. 

August’s data was also in line with the average monthly gain of 196,000 over the prior 12 months. The figures for the last two months were, however, revised down. For June, it was revised down to 208,000 from 248,000 and for July, the count was revised down by 10,000 to 147,000.

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Have tariffs started taking a toll?

The job gains in August were led by professional and business services, which added 53,000 jobs. Healthcare added 33,000, and wholesale trade, transportation and warehousing, and mining (XME) added 22,000, 20,000, and 6,000 jobs, respectively.

The manufacturing sector shed 3,000 jobs during August. This is the first time in the last year that the sector has cut jobs. This could be due to the impact of Trump’s tariffs and trade partners’ counter tariffs. 

Automakers (CARZ) and machinery companies are bearing the brunt of higher steel and aluminum prices. Manufacturing and construction sectors were expected to be most impacted by the tariffs put in place until now. 

The big four US tech firms (XLK) have lobbied to be excluded from the next round of tariffs on China. Dell (DVMT), Cisco (CSCO), HP, Inc. (HPQ), and Juniper Networks (JNPR) have warned that tariffs would lead to increased component costs, which could lead to job losses.

Fed’s planned path on track

The US job additions in August were higher than expected, which supported the US dollar (UUP) and pressured gold prices (SGOL)(GLD). The job additions data was stronger than expected, which should keep the Federal Reserve on its gradual rate hike (TLT) path. However, if the trade impact is visible in the job numbers and business plans going forward, the Fed might have to relent on its rate hike plans going forward.

In the next part of this series, we’ll discuss the unemployment rate and wage growth for the US economy in August. We’ll also see how these factors could impact the rate hike outlook for the Fed.

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