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At Fed turning points in policy, good economic news can be bad news for financial markets and vice versa. Notably below expectations payroll job growth for August led markets to believe that the Fed will not raise policy rates until well into 2015. Equity traders saw this as good news. Meanwhile, outside of the employment report, the economy appears to be favorable.
 On a holiday delayed trading week, stocks were mixed Tuesday despite better than anticipated manufacturing and construction data. ISM manufacturing and construction outlays were quite strong. Energy stocks tugged down on equities and many traders were on the sidelines ahead of central bank news. Most indices were down Wednesday although the Dow barely rose. The big news was a drop in Apple shares as Apple grappled with a possible security breach of its iCloud service a week before the launch of its new iPhone. Earlier in the day, stocks gained on news that officials from Ukraine and Russia said they were close to an agreement to stop fighting in eastern Ukraine, but confusion lingered as Russia announced plans to carry out military exercises. Motor vehicle sales were healthy but the data trickled out during the trading day, not to be finalized until after stock close.
 Thursday, stocks see-sawed in the U.S. Equities rallied Thursday morning after the European Central Bank lowered its key interest rate to 0.05 percent and introduced an asset buying program. However, stocks ended the day lower, as they reversed course in the afternoon as energy shares dropped and investors grew cautious before Friday's employment situation report. On the economic news front, data were mixed. Jobless claims remained relatively low. The international trade deficit was lower than expected. But ADP private jobs growth was under expectations.
Friday, it was all about the jobs report and likely reaction by the Fed. Payroll jobs came in significantly below expectations and many traders saw that as further justification for easy monetary policy. Fed rate increases were seen as delayed and stocks rose on the day and week.
Equities were mostly up this past week. The Dow was up 0.2 percent; the S&P 500, up 0.2 percent; the Nasdaq, up 0.1 percent; and the Wilshire 5000, up 0.2 percent. The Russell 2000, was down 0.4 percent;
For the year-to-date, major indexes are up as follows: the Dow, up 3.4 percent; the S&P 500, up 8.6 percent; the Nasdaq, up 9.7 percent; the Russell 2000, up 0.6 percent; and the Wilshire 5000, up 7.9 percent.
Weekly percent change column reflects percent changes for all components except interest rates. Interest rate changes are reflected in simple differences.
 Bond traders paid attention to economic news this past week. The biggest daily swings were Tuesday and Thursday. Treasury rates rose Tuesday on strong numbers for ISM manufacturing and construction spending. Thursday, jobless claims remained relatively low and the ISM non-manufacturing index came in above consensus and notably positive. Again, many traders stayed on the sidelines ahead of the Friday employment report.
For this past week Treasury rates were up as follows: the 2-year note, up 2 basis points; the 5-year note, up 7 basis points; the 7-year note, up 10 basis points; the 10-year note, up 11 basis points; and the 30-year bond, up 15 basis points. The 3-month T-bill was unchanged.
 The Fed is getting a break on inflation with softening oil prices. Despite modest volatility, the trend has been down.
On Tuesday, the spot price for West Texas Intermediate dropped to the lowest level since January on worries of slower manufacturing in Europe and China that will cut into global oil demand. WTI declined more than $2-1/2 per barrel for the day. But there was a rebound Wednesday of almost $2. This was due to a perceived improvement in the Ukraine/Russia situation as progress was seen in a cease fire in eastern Ukraine. After a quiet Thursday, WTI declined dollar per barrel on a weak jobs report.
Net for the week, the spot price for West Texas Intermediate dropped $2.36 per barrel to settle at $93.50.
The employment situation report for August was very disappointing. But it raised hopes that the Fed will stay easy. But in contrast, other economic news generally topped expectations.
Is the recovery sputtering' The latest employment report clearly raises that question. But there may be a divergence between the non-labor market part of the economy and the labor market. Also, there is a chance that job growth is being underestimated.
 The employment situation for August was notably disappointing. But some commentators note that August is a very revisable number with the data for the month frequently revised upwards.
Payroll jobs rose only 142,000, after a 212,000 increase in July and 267,000 boost in June. Net revisions for June and July were down 28,000. Market expectations for August were for a 230,000 gain.
 The unemployment rate eased back to 6.1 percent from 6.2 percent in July. Expectations were for 6.1 percent. The "U-6" underemployment rate slipped to 12.0 percent from 12.2 percent in July.
Going back to the payroll report, private payrolls rose 134,000 in August after a 213,000 gain in July. Professional and business services added 47,000 jobs in August. Employment in health care increased by 34,000 in August. Within leisure and hospitality, employment in food services and drinking places continued to trend up in August (+22,000). Construction employment continued to trend up in August (+20,000).
Manufacturing employment was unchanged in August, following an increase of 28,000 in July. Motor vehicles and parts lost 5,000 jobs in August, after adding 13,000 jobs in July. Auto manufacturers laid off fewer workers than usual for factory retooling in July, and fewer workers than usual were recalled in August.
Average hourly earnings rose 0.2 percent, matching expectations and improving over July's 0.1 percent. Average weekly hours were unchanged at 34.5 hours.
Overall, the latest numbers bolster the arguments for Fed doves to keep policy loose. However, other data suggest possibly otherwise. Jobless claims are relatively low. Also, consumers are spending on new cars. If the labor market were really weak, car sales would not be up.
 Consumers are out spending—at least for motor vehicles. This is a boost for manufacturing and the economy overall.
Incentives helped feed a very large 6.4 percent jump in car and light truck sales to an annual rate of 17.53 million vehicles. All readings show solid gains including domestic-made and foreign-made models.
These results are some of the first hard numbers out of August and will boost expectations for retail sales as well perhaps, given their unusual strength, for other economic data, including jobs and housing.
There are signs that manufacturing is regaining strength in August.
Growth in Markit's US manufacturing sample accelerated in August, to a final 57.9 versus a mid-month reading of 58.0 and a final July reading to 55.8. The report notes strength for new orders, especially a pickup for export orders, as well as strength for production and employment. Input prices rose though prices for finished goods were little changed.
 Turning to the ISM survey, manufacturing growth was very strong as the composite index jumped to 59.0 from 57.1 in July.
New orders headlined August's strength, rising to an exceptional 66.7 versus an already very strong 63.4 in July. Production is at 64.5, versus July 61.2, with employment steady and strong at 58.1 versus 58.2. Other readings include strength for export orders, at 55.0 for a 2.0 point gain. This report raises the outlook for manufacturing, a sector that is helping to drive the economy forward.
Surprisingly, forward momentum for the economy is coming from the foreign sector.
 The trade deficit in July shrank marginally to $40.5 billion from $40.8 billion in June,
Exports rose 0.9 percent in July after no change the month before. Imports gained 0.7 percent, following a 1.1 percent drop in June.
 The goods excluding petroleum gap decreased to $44.7 billion from $45.0 billion in June. Also the petroleum balance contracted to $14.5 billion in July from $14.7 billion the prior month. The services surplus was essentially unchanged at $19.6 billion.
Import news can at times provide insight into domestic demand. This appears to be the case with July data. Domestic demand may be stronger than earlier believed.
According to the Commerce Department, the July gap with China was a record. This could suggest an improvement in business sentiment for U.S. consumer demand in coming months-notably the holiday season. Import deliveries take time.
The latest trade data point to a moderately strong third quarter. The Fed may have to reconsider slightly its timing of raising policy rates. But Friday's employment report is what traders will really react to since the Fed is focusing on the labor market.
 The economy is seeing a widening of moderate growth. The construction sector has been sluggish in recent months but the latest numbers are positive and encouraging.
Construction outlays saw a broad-based gain in July. Construction spending rebounded 1.8 percent after a 0.9 percent dip in June. While all broad categories advanced, July's increase was led by the public sector—up 3.0 percent, following a 1.8 percent decrease in June. Private nonresidential spending rebounded 2.1 percent in July after slipping 0.8 percent the month before. Private residential outlays gained 0.7 percent, following a 0.4 percent dip in June.
On a year-ago basis, total outlays were up 8.2 percent in July, compared to 7.0 percent the month before.
Overall, the latest construction data add to third quarter momentum. Third quarter GDP estimates will likely be nudged up. And second quarter GDP will be bumped up in the construction components due to upward revisions. There is a lot of recent volatility in construction data but the residential gain is encouraging.
The latest Beige Book shows a steady as she goes economy which is not likely to be strong enough to argue for early rate increases by the mostly dovish FOMC. The latest employment report adds to that sentiment.
The Fed's Beige Book indicated that the economic expansion is "moderate" in six Districts and "modest" in four Districts. Consumer spending growth is positive but seen as modest in most districts. A key point was that job growth is modest-meaning the Fed will not be in a rush to end taper earlier than scheduled. The timing of the first rate increase likely will still be under debate within the Fed, however. Fed contacts see real estate activity as expanding or holding steady-neither of which indicates strength. New sales growth is modest.
For the labor market, nearly all districts see shortages of skilled labor. The question, however, is at what price that firms want to pay. Price pressures are low.
Manufacturing may not be as strong as it has been. This sector is described as mixed.
Overall, the expansion is showing moderate growth. Again, the latest Beige Book only points to a moderate economy and without strong job gains. Hawks will make their points at the next FOMC but the doves almost certainly will carry the vote and the guidance.
Yes, the latest employment report was disappointing. But other data raise questions about the data validity—will there be upward revisions' While not hugely robust, other indicators have been reasonably healthy. Manufacturing, construction, and consumer spending look rather good. Something must be fueling these sectors and it "may" be stronger than measured employment.
The consumer sector is this week's focus. A big question is whether the soft August employment report appears real to consumers. Based on auto sales, the economy is stronger than employment data. Will retail sales out on Friday be on the same track after two weak months of sales' Jobless claims have been low—a positive versus the employment report—and we get the usual update on Thursday. Consumer sentiment has been edging up—will that trend continue' There is a reasonable chance that this coming week's data on the consumer sector raise questions about the softness in the payroll employment numbers.
Consumer credit outstanding rose $17.3 billion in June and was driven once again by the nonrevolving component, which rose $16.3 billion on vehicle financing and also the government's continued acquisition of student loans from private lenders. The gain in auto purchases reflects both an aging auto fleet and consumer belief that the economy—and notably the labor market—is building momentum. Student loan increases are largely a technicality of moving loans from private lender balance sheets to government balance sheets. The revolving component, which is key for retailers, did rise but moderately, up $0.9 billion following a revised $1.7 billion rise in May that followed a rare surge in this category of $8.8 billion April. Revolving credit has been volatile recently but modestly healthy on average.
Consumer credit Consensus Forecast for July 14: +17.3 billion
Range: +$14.0 billion to +$21.5 billion
The NFIB Small Business Optimism Index posted a 7 tenths gain in July to 95.7. Improvement in the outlook for the economy led the improvement. Components were little changed from June. Plans to increase employment rose but only by 1 point to 13 while current job openings fell by 2 points though the level for this reading, at 24, leads all components. Right behind, at 23, were capital expansion plans which gained 1 point on the month.
NFIB Small Business Optimism Index Consensus Forecast for August 14: 96.0
Range: 96.0 to 97.0
The Labor Department's Job Openings and Labor Turnover Survey indicated that there were 4.671 million job openings on the last business day of June, up slightly from 4.577 million in
May. The hires rate (3.5 percent) was little changed and the separations rate (3.3 percent) was unchanged in June. Within separations, the quits rate (1.8 percent) and the layoffs and discharges rate (1.2 percent) were unchanged. There were 4.830 million hires in June, little changed from 4.738 million in May. The number of hires was little changed for total private, government, and all industries and regions.
JOLTS job openings Consensus Forecast for July 14: 4.705 million
Range: 4.550 million to 4.740 million
Wholesale inventories rose 0.3 percent in June, a modest rise in line with a modest 0.2 percent gain in wholesale sales that leaves the stock-to-sales ratio unchanged at a lean 1.17. Activity has been strong in the auto sector with wholesale sales of autos jumping 2.1 percent, following gains of 1.4 percent and 3.1 percent in the prior two months. The gain in sales made for a 0.3 percent draw in wholesale inventories of autos, one that will have to be replenished which is a plus for auto production.
Wholesale inventories Consensus Forecast for July 14: +0.5 percent
Range: +0.4 to +1.6 percent
Initial jobless claims are steady at low levels, up 4,000 in the August 30 week to 302,000. The 4-week average was up 3,000 to 302,750. Continuing claims, which lag by a week, did show improvement, down 64,000 in the August 23 week to a new recovery low of 2.464 million. The 4-week average was down 14,000 to 2.511 million, which is also a recovery low.
Jobless Claims Consensus Forecast for 9/6/14: 300,000
Range: 295,000 to 325,000
The U.S. Treasury monthly budget report showed for July that the government's deficit, 10 months into its fiscal year, is running 24 percent below last year, at $460.5 billion versus $607.4 billion. Individual tax receipts were up 4.9 percent so far this fiscal year with corporate tax receipts, which is a much smaller category, up 14.4 percent. Total receipts were up 8.0 percent. The spending side of the ledger showed only a marginal 1.2 percent advance with defense spending down 5.5 percent. For July alone, the deficit came in nearly as expected, at $94.6 billion. Looking ahead, the month of August typically shows a deficit for the month. Over the past 10 years, the average deficit for the month of August has been $105.2 billion and $133.3 billion over the past 5 years. The August 2013 deficit came in at $147.9 billion.
Treasury Statement Consensus Forecast for August 14: -$130.0 billion
Range: -$141.0 billion to -$130.0 billion.
Retail sales disappointed for a second month in a row. Retail sales were flat in July, following a 0.2 percent gain the month before. Motor vehicles slipped 0.2 percent, following a decrease of 0.3 percent in June. Excluding motor vehicles, sales edged up 0.1 percent, following an increase of 0.4 percent in June. Excluding motor vehicles and gasoline, sales nudged up 0.1 percent in July after jumping 0.6 percent the prior month.
Retail sales Consensus Forecast for August 14: 0.6 percent
Range: +0.2 to +1.0 percent
Retail sales excluding motor vehicles Consensus Forecast for August 14: +0.3 percent
Range: +0.1 to +0.5 percent
Less motor vehicles & gasoline Consensus Forecast for August 14: +0.4 percent
Range: +0.2 to +0.6 percent
Import prices fell 0.2 percent in July and were unchanged when excluding petroleum. Year-on-year rates were also muted, up 0.8 percent overall and, when excluding petroleum, up only 0.7 percent. Prices of imported finished products were also soft with motor vehicles down 0.8 percent in the month for the largest decrease since December 1992. Year-on-year, prices of imported vehicles were down 0.9 percent. The export side was also soft, unchanged in the month with the year-on-year rate at only plus 0.4 percent.
Import prices Consensus Forecast for August 14: -1.0 percent
Range: -1.5 to 0.0 percent
Export prices Consensus Forecast for August 14: -0.1 percent
Range: -0.8 to +0.2 percent
The Reuters/University of Michigan's consumer sentiment index was up in the final August reading, to 82.5 versus 79.2 at mid-month and versus 81.8 in final July. The gain was centered in current conditions and underscores the improvement this month in unemployment claims. The current conditions component in this report was at 99.8 versus 99.6 at mid-month and 97.4 in final July. A rise in current conditions points to general month-to-month strength for consumer activity. Expectations are lagging. The expectations component came in at 71.3, well up from 66.2 at mid-month but down 5 tenths from 71.8 in final July.
Consumer sentiment index Consensus Forecast for preliminary September 14: 83.4
Range: 81.3 to 89.5
Business inventories rose 0.4 percent in June, a moderate rise by itself but not in comparison to business sales which rose only 0.3 percent. But the mismatch was only minor and does not raise the stock-to-sales ratio which stands unchanged at 1.29. Retail inventories backed up in June, rising 0.5 percent vs only a 0.2 percent rise in sales. This was a more significant mismatch that raised the stock-to-sales ratio for this sector 1 notch to 1.42 from 1.41.
Business inventories Consensus Forecast for July 14: +0.4 percent
Range: +0.2 to +0.5 percent
R. Mark Rogers is the author of The Complete Idiot's Guide to Economic Indicators, Penguin Books.
He can also be found on a weekly broadcast talking about the U.S. economy, the easiest way to find him is by going to iTunes and searching for "Simply Economics."
Econoday Senior Writer Mark Pender contributed to this article.
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