The US 10-year yield fell to 1.85% from 1.90% overnight on flight-to-quality buying, but recovered the lost ground after the US Bureau of Labor statistics reported a 164,000 gain in US payroll employment. The labor market report, though, was weaker than the headline number suggests, because the average workweek fell to 33.3 hours from 33.4 hours. In addition, employment gains for May and June were revised down sharply.

Total hours worked (payroll employment times the average workweek) is the most comprehensive measure of labor in the US economy. The year-on-year growth rate of this comprehensive measure has slowed from 3.8% at the end of 2018 to 3% in July. As the chart shows, the decline in the growth rate of total hours worked tracks the fall in the National Association of Purchasing Managers’ composite index.

The US economy is slowing, in large part because manufacturing has declined for the past two quarters. Business investment has turned negative, mainly due to uncertainties arising from the trade war. During the second quarter GDP grew at an annual rate of 2.1%, but that included a contribution of 0.85% from federal, state and local governments, much larger than most forecasters expected (the widely-followed Atlanta Federal Reserve GDPNow model anticipated a contribution of just 0.30%). The private economy, that is, grew at an annual rate of just 1.25%.

Consumer spending remains strong, but consumer investment has fallen sharply. Private spending on residential construction is down 8% year-on-year.

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