Zacks Investment Management

In today’s Steady Investor, we cover three developments influencing the market landscape and what they could mean for investors, including:

• U.S. jobs market stays resilient
• Corporate borrowing remains strong
• Oil volatility returns to focus

The U.S. Jobs Market Remains Resilient – August’s jobs report helped ease concerns that the labor market was slipping into a deeper slowdown. The U.S. economy added 162,000 jobs, well above expectations, while the unemployment rate held steady at 4.1%.¹

Total Nonfarm Payroll (Changes in Thousands of Persons, January 2024 – Present)

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Labor force participation also ticked up to 61.6%, its first monthly increase since last September.The prior two months looked better after revisions, too. July was revised from a loss of -23,000 jobs to a gain of 21,000, while June was revised up to 31,000. Altogether, the economy has added an average of about 80,000 jobs per month so far this year, a clear improvement from 2025’s average of 10,000.That all being said, investors should not assume the jobs market is on completely solid footing. Some of August’s strength came from likely one-off rebounds, including 59,000 jobs added in food services and drinking places and 42,000 in local government education. Wage growth also remains a pressure point, with average hourly earnings up 3.1% from a year earlier, slightly below July’s 3.4% inflation rate. We’ve written this before, but perhaps the most apt description for the U.S. jobs market is “low hire, low fire,” where layoffs are limited but hiring and job switching remain subdued. Overall, we think the labor market looks healthier than it did earlier this summer, but payrolls are still lagging.

Corporate Borrowing Shows Credit Markets Are Still Open – Companies are moving quickly to raise money in global bond markets, a sign that higher interest rates and geopolitical uncertainty are influencing corporate financing decisions. This past Tuesday, global borrowers raised more than $70 billion, the busiest issuance day since June, as companies were clearly looking to lock in funding before borrowing costs potentially move higher. Investors are of course very cognizant of renewed U.S.-Iran tensions, rising oil prices, stubborn inflation, and the possibility that the Federal Reserve could raise rates later this month.Even still, investors are clearly comfortable lending in the current rate environment. In the U.S. high-grade market, investor demand was roughly four times the amount of bonds sold, according to Bloomberg data. Issuers were also able to price deals with relatively limited extra spread compared with their existing debt, suggesting buyers are still willing to provide capital at reasonable terms.Heavy issuance does not guarantee future growth, but it does suggest the market is not shutting companies out.⁴

Oil Volatility Moves Back Into Focus – Oil prices moved back above $100 a barrel this week, as renewed fighting in the Middle East raised fresh concerns about shipping and supply disruptions. As we write, Brent crude rose 4.1% to $105.37, while WTI climbed 4.3% to $100.13, putting both benchmarks back near levels last seen earlier this year.The concern is not just the price move itself, but the pressure on physical energy flows. The Strait of Hormuz normally carries about one-fifth of global petroleum shipments, but analysts estimate current flows remain far below prewar levels. HSBC expects shipments through Hormuz to rise from roughly 6 million barrels a day now to 8 million by year-end and 9.5 million by mid-2027—still well below the prewar range of 19 million to 20 million barrels a day.Other data point to similar strain. Middle East Gulf sour-crude exports averaged 5.88 million barrels a day in the second quarter, down 65% from a year earlier. The EIA estimates Middle East production shut-ins averaged 6.7 million barrels a day in August and could still average 5.7 million in the fourth quarter.Taken together, we think some of today’s price reflects physical disruption, while some reflects fear and positioning. The key question is whether supply flows continue improving, or whether renewed conflict keeps energy markets tight for longer.⁵

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