US Economy Defies Headwinds with Strong Employment Report

The US economy has demonstrated its resilience in the face of headwinds, according to recent data. The August employment report showed nonfarm payrolls increasing by 162,000, exceeding consensus expectations by a significant margin. This rebound follows July's disappointing payroll print, and when combined with revised figures for June and July, the average monthly employment data indicates an economy adding jobs at a healthier pace than initially suggested.

The labor force participation rate rose to its strongest level in roughly a year, reaching 61.6%, while the unemployment rate held steady at 4.1%. Average hourly earnings increased by 0.3% month-over-month, meeting expectations. The U-6 rate, which captures underemployment and those working part-time who prefer full-time work, has been trending down from 8.7% in November 2025 to 7.7% in August.

However, not all signals are encouraging. Real personal income excluding transfer receipts fell 0.38% year-over-year in July, its fifth consecutive negative reading. This decline is modest in aggregate but indicates strain at the lower end of the income spectrum. Business sentiment is improving, with the JP Morgan Global Composite Purchasing Manager Index pointing to the fastest growth in over two years.

Globally, growth in the services sector was led by the financial sector, while consumer spending increased from a war-related slowdown experienced in the second quarter. Domestically, the ISM Services PMI climbed to 55.4 in August, indicating strong expansion and marking nine consecutive months above 53.

Shelton Capital Management expects continued positive economic momentum, which could lead to strong corporate earnings and higher equity markets. They favor US equities over foreign, with a focus on information technology, financials (regional banks), and health care. The Cash Indicator currently reads 11.26, well below its long-term median of 25, suggesting confidence in the credit market despite some equity market skittishness.