Headlines of the Week

BlackRock now has the biggest slice of Sports Illustrated owner Authentic Brands

Investment giant BlackRock just became the largest stakeholder of Sports Illustrated’s parent company. BlackRock bought roughly a 30% stake in Authentic Brands Group for $875 million, the company’s chief executive officer Jamie Salter told CNBC’s Brian Sullivan in a phone interview on Sunday. The deal values the brand management company around $4 billion to $4.5 billion, including debt, according to Salter. Created in 2010, Authentic Brands Group owns more than 50 athletic, entertainment, apparel and consumer brands, as well as the likeness of celebrities Muhammad Ali, Elvis Presley, Shaquille O’Neal, and Marilyn Monroe, according to the company’s website. In addition to Sports Illustrated, Authentic Brands Group owns Aeropostale, Juicy Couture, Herve Leger, Nine West, Spyder, and Frye. Singapore’s GIC also added about $150 million to the deal. Investment firm Jasper Ridge Partners also contributed $80 million.

Steve Madden Is Buying Greats

Steve Madden is kicking up its sneaker business with the acquisition of Greats Brand Inc. Greats, a digital upstart founded by Ryan Babenzein in 2014, has emerged as one of the hottest new labels in the sneaker space. Financial terms of the deal weren’t disclosed, but Madden said Greats had net sales of about $13 million for the 12 months ended June 30. “In the 30 years since I started Steve Madden, rarely have I come across an opportunity as exciting as this,” said the namesake founder and creative chief. “Ryan’s shoes are the talk among all the millennial men I encounter. He reminds me so much of myself. We can’t wait to explode this thing.”

Apparel & Footwear

Victoria’s Secret cancels its runway show

Victoria’s Secret appears to be pivoting from its decades-long core marketing approach with the cancellation of its fashion show, according to multiple news reports last week. The event has faced increased controversy in the era of #MeToo, and in May had already been taken off network television by brand parent L Brands. Meanwhile, the brand has hired its first openly transgender model, Valentina Sampaio, for its PINK sub-brand, the model’s agent confirmed to CNN. That’s notable in light of longtime L Brands marketing chief Edward Razek’s comments to Vogue magazine ahead of last year’s fashion show that he didn’t think the brand’s diversity effort should include transgender models. Victoria’s Secret was already facing the challenge of determining how its highly sexualized branding, predicated on the male gaze, fits in the #MeToo era.

A’gaci files Ch. 11

Women’s fashion retailer A’Gaci on Wednesday filed under Chapter 11 in the United States Bankruptcy Court for the Western District of Texas San Antonio Division, with the intention to “close and wind down all of its brick and mortar store locations.” As of Wednesday, the retailer operated 54 retail stores, according to court documents. The retailer has received approval to conduct “going out of business” sales beginning Aug. 8, according to court documents. A’gaci said it expects the bulk of store closings to be completed by Aug. 31. The filing marks the San Antonio-based retailer’s second bankruptcy. A’gaci filed for Chapter 11 bankruptcy protection in January 2018. The retailer seeks the approval of a $10 million senior secured asset-based loan provided by the lenders. The company as of Wednesday had outstanding debt of “not less than $6,099,123.62,” he added.

Boohoo buys Karen Millen and Coast online businesses for £18m

Fashion firm Boohoo has bought the online business of UK brands Karen Millen and Coast for £18.2m. Boohoo, an online-only retailer, said acquiring the website operations of the two brands “would represent highly complementary additions”. The firms have 32 High Street stores and operate through 177 concessions in the UK, employing 1,100 people. Administrators Deloitte, who oversaw the sale, said the stores would continue to trade for a “short time”. There will be 62 immediate redundancies, and the future of the remaining workforce remains in doubt while the stores’ future is clarified. High Street brand Karen Millen had been put up for sale by its Icelandic owners, Kaupthing bank, in June. Both brands were placed into administration on Tuesday and then immediately sold to the online fashion group. the brand to a newer audience.”

‘We have nothing to lose’: Modcloth is gearing up for a Walmart-free future

Walmart is preparing to sell off Modcloth. “I can confirm that Walmart has received outside interest from buyers for Modcloth,” said Silvia Mazzucchelli, Modcloth’s CEO since April, when asked on Friday about Walmart’s potential sale of the company, first reported by Recode in July. “We are in the process of exploring potential opportunities.” Walmart acquired Modcloth in March of 2017, for between $50 million and $75 million, as part of Walmart president and CEO of e-commerce Marc Lore’s plan to modernize the company’s brand portfolio while selling brands not found on Amazon. Since, Lore has led acquisitions of other digitally native fashion brands including Bonobos in June 2017 and Eloquii in October. With Walmart’s e-commerce channel expected to lose $1 billion this year, selling off these brands is a way to cut losses. It’s been reported that all are unprofitable, a claim Modcloth declined to confirm or contest.

Athletic & Sporting Goods

Nike acquires A.I. platform Celect, hoping to better predict shopping behavior

After years of scooping up brands like Converse and Hurley, Nike is shifting its focus toward buying start-ups that help it behind the scenes. Nike announced on Tuesday it has acquired Boston-based predictive analytics company Celect, marking its latest acquisition in a string of deals to bolster its direct-to-consumer strategy. Financial terms of the deal weren’t disclosed. With Celect’s technology integrated into Nike’s mobile apps and website, the shoemaker should be able to better predict what styles of sneakers and apparel customers want, when they want it and where they want to buy it from, Chief Operating Officer Eric Sprunk explained in an interview. Celect, which is based in Boston and was founded in 2013, will immediately be integrated into Nike’s global operations team, the company said.

Accell Group sells loss making US business

Accell Group has reached agreement with private equity firm Regent for the sale of its loss making US business including the worldwide registrations of the brands Diamondback, Redline and IZIP. In addition, Accell and Regent agreed on an exclusive 2-year US distribution partnership for the international Accell brands Raleigh, Haibike and Ghost. The US business was effectively transferred on August 6, 2019. Following the sale of its Canadian brand registrations announced on July 12, 2019, the latest announcement completes the strategic review of the North American operations and allows Accell to focus on its European (core) business.

Foot Locker is opening more massive ‘Power’ stores across US—and it’s teaming with Nike to do it

Foot Locker is teaming with Nike as it rolls out bigger, more interactive stores. These so-called Power stores are four times as big as a typical Foot Locker store in malls. The newest will open in New York — in the Washington Heights neighborhood of Manhattan. The retailer plans to open upwards of 50 Power stores over the next three years. It has three in the U.S. today: one in Detroit and two in Philadelphia. The roughly 9,000-square-foot store in Washington Heights is the first location where Nike has brought some of its proprietary technology into another retailer’s bricks-and-mortar shop. At the store, Nike’s loyalty members can scan a bar code within their Nike app to get free swag like sunglasses, purchase exclusive products and have the chance to win a free pair of sneakers.

Cosmetics & Pharmacy

The Vitamin Shoppe To Be Acquired By Liberty Tax

Liberty Tax, Inc., the parent company of Liberty Tax Service and Buddy’s Home Furnishings, reached an agreement to acquire Vitamin Shoppe Inc. in an all-cash transaction valued at approximately $208 million. The Vitamin Shoppe shareholders will receive $6.50 per share, which represents a premium of 43 percent to its closing share price on August 7, 2019, and a premium of approximately 59% to the 30-day volume weighted average price for the period ended on August 7, 2019. The transaction is expected to be completed in the fourth quarter of 2019, subject to approval by The Vitamin Shoppe’s shareholders, expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as well as other customary closing conditions. Liberty Tax intends to finance the transaction with up to approximately $170 million in debt financing and a combination of available cash and/or through the issuance of common stock of Liberty Tax.

Myro Receives Investment From Serena Williams, Carmelo Anthony

The gender-neutral refillable deodorant brand, Myro, has received an investment from from Serena Williams and Carmelo Anthony. The athletes are two of a number of investors that contributed to a $7 million seed funding round for the refillable deodorant brand. “I’m always trying to find the next big thing, and refillable deodorant just feels relevant to the time we’re living in. With the way the world is now, it’s so important to invest in sustainable brands doing positive things,” said Anthony.

Independent community pharmacy plays a vital role in health care

Depending on who you talk to, there are roughly 25,000 small chain and independent pharmacies in the United States. Some of these are small family-owned chains like the Marquess Group, with 10 locations in Georgia. But most are single-location pharmacies operated by a pharmacist owner. There is no question that these pharmacies are dealing with enormous challenges. But whether you own a pharmacy or work for a company trying to sell to them, it would be a mistake to think of them as a dying breed.

CVS Health posts strong Q2

CVS Health’s second-quarter 2019 results brought increased revenue and earnings per share. Revenue growth was primarily driven by the acquisition of Aetna, which the company acquired on Nov. 28, 2018, as well as increased volume and brand name drug price inflation in both the pharmacy services and retail/long term care segments. For the quarter, CVS Health saw a 35.2% increase in revenue, which totaled $63.4 billion and adjusted earnings per share of $1.89. Operating income increased to $3.3 billion. However, operating expenses increased 65.2% compared to the prior year.

Walgreens to close 200 U.S. stores

Walgreens Boots Alliance is reducing its footprint in the United States by about 3%. In an SEC filing, the drug store operator said it plans to close about 200 U.S. stores, for which it expects to record related pre-tax charges of between $1.9 billion and $2.4 billion. Earlier this summer, the company announced it planned to close 200 Boots stores in the U.K. and that it was also reviewing its portfolio in the U.S., where it operates approximately 10,000 stores. The store closures are part of the company’s previously announced “transformational cost management program,” which is expected to deliver annual cost savings in excess of $1.5 billion by 2022.

Discounters & Department Stores

26 Sears, Kmart stores are set to close in October, company ‘cannot rule out’ more closures this year

More Sears and Kmart stores are set to go dark, as the brands’ new parent company, TransformCo, fights to keep the once-bankrupt business afloat. The company announced on its website last week that 26 additional Sears and Kmart stores will close in late October, ranging from locations in California to Texas to Virginia. Liquidation sales will begin around Aug. 15, the company said. The Sears Auto Centers at certain locations will start closing later this month. TransformCo added it “cannot rule out additional store closures in the near term.”

Barneys, a nearly century-old icon of New York retail, files for bankruptcy

Barneys New York, an icon of New York retail, filed for bankruptcy early Tuesday morning, with a plan to significantly reduce its footprint, as it looks for a buyer to stave off liquidation. The retailer said it will focus on running only 5 of its more than 10 namesake stores: on New York’s Madison Avenue, in downtown Manhattan, Beverly Hills, San Francisco and Copley Place. It will also keep open its Barneys Warehouse stores in Woodbury Common and Livermore. It plans to close its stores in Chicago, Las Vegas and Seattle, as well as five smaller concept stores and seven Barneys Warehouse stores.

Department stores could have a ‘sobering’ Christmas, Credit Suisse warns

This holiday season could be a “sobering” one for America’s department store chains, warns Credit Suisse analyst Michael Binetti. He expects a “wave of lowered guidance” as Macy’s, J.C. Penney, Nordstrom and Kohl’s start to report fiscal second-quarter earnings next week, he said in a note to clients Thursday. While these retailers appear to have tightened up their inventories during the second quarter, which should help reduce pressure on gross margins, Binetti predicts these companies will have lower sales and earnings targets for the second half of the year, with waning foot traffic at stores hurting the group. To top it off, these retailers now face the 10% tariffs set to go into effect on Sept. 1, which will hit apparel and footwear, among other consumer-facing goods. 

Emerging Consumer Companies

Bloomscape raises $7.5 million

Bloomscape, a digitally-native plant company, announced $7.5 million in Series A funding. The round was led by Revolution Ventures with participation a number of founders of leading consumer brand founders, including Allbirds co-founder Joey Zwillinger, Away co-founder Jen Rubio, Eventbrite co-founder Kevin Hartz, Harry’s co-founder Jeff Raider, Quora co-founder Charlie Cheever, and Warby Parker co-founders Neil Blumenthal and Dave Gilboa.

Re:store, retail-as-a-service for emerging brands, opens in San Francisco

Re:store, the startup providing an immersive shopping experience for emerging brands, opened in San Francisco. For its launch, 70 coveted direct-to-consumer brands were chosen as debut partners, including Dirty Lemon, Sleepy Jones, and Thinx. Each brand receives its own dedicated area within the 3-level, 4,200 square foot space.

Gin Lane shuts down agency, launches Pattern to build brands from the ground up

Gin Lane, the branding agency behind many high-profile digitally-native brands, has shut down its branding agency and transitioned to an organization designed to launch the types of companies it was previously working with. Gin Lane had worked with companies such as Harry’s, Sweetgreen, Hims, Smile Direct Club, Dia&Co., Everlane, and Warby Parker. It will now build brands like those from within. 

Grocery & Restaurants

Kraft Heinz Hadn’t Hit Bottom After All

It was hard to imagine things getting worse for Kraft Heinz Co. than they did back in February, when the company dropped a cavalcade of bad news. But Kraft Heinz’s latest results, released Thursday morning, made it clear the worst isn’t over. Kraft Heinz said organic sales fell 1.5% from a year earlier for the six months ended June 29, reflecting declines on this measure (which excludes the effects of currency fluctuations and M&A) in the U.S., its largest market. Cost inflation in everything from packaging to logistics, as well as promotional expenses, weighed on profit. Even more worrisome, the company also said it was pulling its full-year earnings and sales guidance, a move that suggests a real uncertainty about the company’s path to growth.

Kayco to acquire Manischewitz’s kosher food business

Kosher foods distributor Kayco is planning to acquire the Manischewitz company, according to Jerusalem-based Jewish newspaper Hamodia. The Manischewitz Co. is one of the largest kosher foods companies in the United States and the largest matzo (unleavened bread) maker in the world. Its portfolio features several kosher brands, including Carmel, Elite, Mother’s, Rokeach, Mrs. Adler’s and Tradition. The Manischewitz Co. has undergone a series of ownership changes since it was founded in 1888. Kayco was created through the merger of Kedem Foods, Kenover Marketing and B&W Foods. The company owns several kosher food brands, including Kedem, Sabra and Fox’s U-Bet and distributes over 70 others. It is owned by the Herzog family.

Sara Lee Frozen Bakery to acquire Superior Cake Products

Sara Lee Frozen Bakery is acquiring Superior Cake Products, Inc., from Hostess Brands, Inc., Kansas City, for $65 million in cash. Superior Cake Products is a manufacturer of sweet goods, including eclairs, madeleines, brownies and cookies that are sold under the Superior on Main brand. Hostess Brands acquired Superior Cake Products in 2016 for approximately $51 million. Superior Cake Products has a specialty bakery located in Southbridge, Mass., where the company processes cookies, brownies and french pastries. For the 12 months ended, April 30, Superior Cake Products had sales of approximately $43 million, according to Hostess Brands.

Perkins & Marie Callender’s files for bankruptcy

Perkins and Marie Callender’s, L.L.C. has filed for bankruptcy protection, announcing plans to sell its Perkins’ business and a segment of its Foxtail bakery business. The announcement marks the second Chapter 11 filing for the company in eight years. The family-dining and casual-dining operator emerged from its 2011 restructuring under control of Wayzata, a private investment firm. The Perkins system consists of 342 Perkins restaurants in 32 states and Canada, including 241 franchised units and 101 company owned and operated locations. The company also has a baked foods and manufacturing division, Foxtail Foods, which manufactures pies, pancake mixes, cookie dough and muffin batter for third-party customers and in-store bakeries. In 2006, the Perkins restaurant and bakery chain combined with Marie Callender’s, which consists of 7 company and 21 franchised restaurants. Marie Callender’s also has a national presence through its supermarket frozen entree lines offered by Conagra Brands.

Atlas completes acquisition of TreeHouse’s snacks unit

Atlas Holdings L.L.C. has completed its $90 million acquisition of the snack nuts and trail mix business of TreeHouse Foods, Inc. The newly established, standalone company will be known as Flagstone Foods, which is the name the business operated under prior to being acquired by TreeHouse in June 2014 for $860 million. Flagstone Foods is headquartered in Minneapolis and will be one of the largest manufacturers and distributors of private label healthy snacks in North America, including nuts, dried fruit and trail mixes. The company will source, process, package and distribute nuts, trail mixes and other wholesome snacks to retail customers across the country from three manufacturing plants in Robersonville, N.C.; El Paso, Texas; and Dothan, Ala.

Home & Road

Motion foundation units down 13.5% in 2Q, industry report says

Motion foundations, traditionally a hot category on retail sales floors, experienced a 13.5% unit decline in the second quarter, while the dollar value of those foundations was down 19.1%, an industry report says. The second quarter Bedding Market Quarterly, issued by the International Sleep Products Assn., shows shipments for motion foundations, both U.S. produced and imported, in the midst of a tough year. For the first six months, total motion foundation units are down 17.3%, while the dollar value of those foundations is down 20.1%, the ISPA report says. Bedding observers say the category may be suffering from a race to the bottom in pricing and from free adjustable bed base promotions favored by some large bedding retailers.

Pier 1 Imports stock faces NYSE delisting for the second time this year

Pier 1 Imports has received a new notice from the New York Stock Exchange saying it is no longer in compliance with rules for continued listing of its shares on the exchange.

This time it’s violating the market cap threshold of $50 million. The Fort Worth-based home furnishings retailer’s market has been at about $25 million on average during the past 30 days ended on Aug. 2, when it had fallen to $14.4 million. Also, Pier 1 may be subject to more immediate suspension if its average market cap stays below another threshold of $15 million for a 30-day trading period.

Jewelry & Luxury

Farfetch Acquires Brand Platform New Guards Group

Farfetch Limited, the leading global technology platform for the luxury fashion industry, and New Guards Group (“New Guards”), a brand platform for luxury brands’ design, production and distribution, today announced that they have entered into an agreement for Farfetch to purchase 100% of the shares of New Guards for a Total Enterprise Value of $675 million. The acquisition of New Guards augments Farfetch’s strategy to be the global technology platform for luxury fashion, empowering individuality, and connecting creators, curators and consumers. New Guards is a brand platform that has launched several global luxury fashion brands, with a proven track record of identifying and nurturing some of the most culturally relevant emerging brands, designers and creative directors in the sector.

Jewelry Now Officially Part of Trump’s Trade War

President Donald Trump’s decision to impose 10% tariffs on $300 billion of Chinese products on Sept. 1 will mean added costs for products used by U.S. jewelers. The president’s decision, announced last week via tweet, basically covers all remaining products imported by China that weren’t covered in the first three rounds of tariffs. Included on the list: diamonds; cultured and natural pearls; precious stones, including rubies, emeralds, and sapphires; synthetic precious stones, including diamonds; silver jewelry; gold necklaces and neck chains; religious jewelry; toy jewelry; and more.

Gold Passes $1,500 Mark for First Time in 6 Years

The spot price of gold passed the $1,500 benchmark on Aug. 7—for the first time since 2013—suggesting the industry is seeing a second gold rush. At press time, the yellow metal was trading at $1,507 an ounce, after closing yesterday on the Comex at $1,472 an ounce. Overall, the price of gold has climbed more than 18% since the beginning of the year. In June, the gold price hit the $1,400 mark for the first time in five years. Analysts attributed the gain to a wide range of factors, including the Federal Reserve’s recent decision to lower interest rates and overall geopolitical uncertainty, stoked in part by the current trade hostilities between the United States and China, which has caused investors to seek a safe haven.

Camile Hannoush Purchases 10-Store Chain Michaels Jewelers

Michaels Jewelers, the 10-store Connecticut chain based in Waterbury, has been purchased by Camile Hannoush, one of the owners of Hannoush Jewelers. Hannoush says that when was approached last year by Mark Michaels—the fifth generation of his family to run the 134-year-old business—he jumped at the prospect. “I love the concept,” he says. “They are very similar to Hannoush. The demographic that they go for are the mainstream. He has a lot of loyalty in his local market.” Michaels Inc., the former parent company of the American Gem Society retailer, also owns 11 Pandora franchise stores. Those will continue to be owned and managed by Mark Michaels and his daughter Lindsay.

 

Office & Leisure

Bratz maker trying to lure Mattel employees to his company

The battle between Barbie and Bratz dolls is getting personal. Isaac Larian, the colorful head of MGA Entertainment, the company behind Bratz dolls, tried to buy Barbie maker Mattel three times and failed. So now he’s looking to pick off his rival’s employees. “Attention #Mattel employees Mattel Inc. We are HIRING,” the MGA CEO wrote on his Linkedin profile last week. The maker of the popular L.O.L. Surprise! dolls implored Mattel employees to “please apply” and “to bring a friend. We will pay you cash for each.” It’s not a joke — though Larian, 65, adds to the post a photo of himself wearing a black, curly, wig decorated with bows and dolls. It is the latest skirmish between rival toy makers, who have been embroiled in litigation over the past dozen years — stemming from a dispute over a Mattel toy designer who joined MGA and helped to launch the Bratz brand.

Canadian Tire buying Party City’s Canadian retail business

Party City Holdco Inc. has entered into a deal to sell its retail stores in Canada and grow its wholesale business. Canadian Tire Corp. will acquire the retail business and assets of Party City’s Canadian subsidiary, including its 65 stores. The all-cash transaction is valued at approximately C$174 million (Canadian dollars). The 2018 pro forma EBITDA of these 65 locations totaled approximately C$17.6 million. Party City said proceeds from the sale will be used to pay down debt. As part of the deal, Party City and Canadian Tire have entered into a long-term wholesale supply agreement, with an initial term of 10 years.  The transaction, which has been unanimously approved by Party City’s board, is expected to close by October 1, 2019.

Office Depot pivot takes a toll on the bottom line

Office Depot on Wednesday said that second quarter revenue fell 2% year over year to $2.6 billion, which was “the result of lower sales in the Retail division, primarily driven by lower same store sales combined with fewer retail stores, and lower sales in the CompuCom division.” The decline was partially offset by stronger sales in the business solutions division. The company reported an operating loss of $15 million, down from operating income of $48 million in the prior-year period, mostly driven by a $55 million increase in merger and restructuring costs. The investments required by Office Depot’s renovation from a big-box office supplies specialty retailer to a more high-touch, well-rounded, business-oriented company continue to take their toll on the bottom line. But the company did better than many analysts expected in the second quarter, and in his statement on Wednesday, CEO Gerry Smith seemed pleased with the performance.

Wells Fargo Leads $825MM Financing for Elliott Advisors’ Acquisition of Barnes & Noble

Wells Fargo Capital Finance announced that it acted as administrative agent, lead arranger and book runner for an $825 million asset-based credit facility in connection with the acquisition of Barnes & Noble, Inc. by Elliott Advisors (UK) Limited. “For us to be able to collaborate with Elliott to complete such important financing and help the firm continue to grow its portfolio of companies is rewarding,” said Lynn Whitmore, managing director of Retail Finance, Wells Fargo Capital Finance. “We are pleased to support Barnes & Noble as they embark on a new phase of investment and growth under Elliott’s sponsorship.” Elliott’s acquisition of Barnes & Noble, the largest retail bookseller in the U.S., follows its June 2018 acquisition of Waterstones, the largest retail bookseller in the U.K.

Technology & Internet

FedEx ends ground delivery with Amazon

FedEx Corp. is snipping another tie with Amazon.com Inc. as the ecommerce giant emerges as a competitor by building its own shipping network. The ground-delivery contract with Amazon won’t be renewed when it expires at the end of this month, FedEx said in an emailed statement. The decision quickens the company’s retreat from the largest online retailer just two months after FedEx said its Express unit wouldn’t extend an agreement to fly Amazon’s packages in the U.S. FedEx is reducing its dependence on Amazon as the online retailer builds out a logistics network with hundreds of fulfillment centers and adds next-day air capacity with leased jets. Amazon is also starting a home-delivery service modeled after the contractor-based ground unit at FedEx, which flagged the competitive risk in its latest annual report to U.S. regulators. Longtime rival United Parcel Service Inc., the largest U.S. courier, is taking a different tack by continuing its relationship with Amazon.

 

Microsoft buys marketing automation vendor PromoteIQ

Microsoft Corp. announced it has acquired marketing automation vendor PromoteIQ. PromoteIQ works with manufacturers and e-retailers to place sponsored ads for products on ecommerce sites of retailers. The service enables online retailers to earn revenue from ads placed on their ecommerce sites and advertisers to target ads at shoppers based on their on-site activity.

 

Finance & Economy

Consumer Confidence Drops Most in 10 Months

Sentiment among U.S. consumers fell the most in almost 10 months, led by dimmer views of the economy as market turmoil returned on another flareup in the U.S.-China trade war. The Bloomberg Consumer Comfort Index decreased 1.8 points to 62.9 in the week ended Aug. 4, data released Aug. 8 shows. Attitudes on the economy dropped to the weakest level in almost two months as views on the buying climate and personal finances also slipped.

Payrolls rise 164,000 as labor force sets a record high

Payroll growth rose in line with expectations in July and the unemployment rate remained at 3.7% amid a sharp jump in the size of the labor force to its highest level ever. The Labor Department reported Friday that payrolls increased 164,000 during the month, just 1,000 below the 165,000 Dow Jones forecast. This also was about the average monthly gain for the year. In 2018, the economy created 223,000 jobs a month. Major stock indexes had little reaction. They were already down in premarket trading before the report.

Morgan Stanley: If the trade war escalates, a recession will be here in 9 months

If the U.S. continues to raise a wall of tariffs on Chinese goods in the coming months and China responds, expect a global recession in three quarters, Morgan Stanley said. “As we view the risk of further escalation as high, the risks to the global outlook are decidedly skewed to the downside,” Morgan Stanley chief economist Chetan Ahya said. The firm believes a global recession will come in about nine months if the trade war further escalates through the U.S. raising tariffs to 25% “on all imports from China for 4-6 months,” Ahya said. “We would see the global economy entering recession in three quarters,” he said in a note to investors.