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Saturday, August 6, 2011

Wells Fargo's Weekly Economic Financial Commentary - August 5, 2011

- Employment data exceeded consensus expectations, posting a gain of 117,000 jobs in July, and net upward revisions of 56,000 to previous months’ data.

. While the report is promising, the government sector shed 37,000 jobs for the month, and the drop in the unemployment rate to 9.1 percent was largely due to a decline in labor force participation, which fell to 63.9 percent.

- The ISM manufacturing index came in at a paltry 50.9 in July, declining significantly from June’s reading of 55.3, while the new orders component fell below the breakeven threshold of 50.

- Even with the passing of the Budget Control Act of 2011 and Moody’s dialing back the threat of a U.S. downgrade, equity markets have sold off more than 11.0 percent in the past two weeks, and 10-year treasury yields have fallen 50 basis points.

- Our outlook expects real GDP to increase at a 2.5 percent annual rate during the third quarter, and while there are clear downside risks, we still do not see a double-dip recession.

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