The stock market is on fire. However, that doesn’t imply President Donald Trump’s ongoing trade war with China isn’t beginning to do real damage to the U.S. financial system.
Investors might ignore the economic warning indicators for now, though eventually, they’ll probably pay for tossing a blind eye to it. “The fingerprints of the trade war were on this employment report, they’re weighing on the economy,” Moody’s Analytics Chief Economist Mark Zandi mentioned on Yahoo Finance’s The First Trade. “Growth is slowing due to the trade war and the uncertainty created by that. I think it will become extra evident going ahead.”
The report Zandi referenced is the June ADP employment figures launched Wednesday. The U.S. private sector added a disappointing 102,000 positions in June, lower than the 140,000 jobs Wall Street was predicting. Final month’s reading represented the smallest improve in private posts since the begin of the economic growth.
While larger companies were including, small businesses with fewer than 50 staff noticed a drop of 23,000 positions. Meanwhile, businesses with 19 or less staff reduced payrolls by 37,000 jobs.
The sector that continues to see weakness was the goods-producing sector, with construction falling by 18,000 positions. Inside the services-producing sectors, leisure and hospitality added a meager 3,000 jobs in June.
The report joins a lengthy listing of reads on the U.S. economic system — from a lackluster quarter for transport giant FedEx to cooling ISM manufacturing results — that paint the financial system in a less than stellar light.
“I don’t think the nominal truce President Trump and Xi agreed to this previous weekend is going to cut back the uncertainty that many large firms face,” Zandi cautioned. “As long as they’re uncertain what merchandise is going to have tariffs, they don’t seem to be going to be out there hiring folks. So I think the trade war will proceed to do damage to the labor market.”
Nevertheless, the S&P 500 powered to a report high Wednesday morning. Don’t get used to it bulls, the non-farm payrolls report out on Friday could be a doozy.