American workforce shrinks, Tesla milestone and more: Monday's 5 things to know

Here are the key events taking place on Monday that could impact trading.

AMERICAN WORKFORCE: The number of workers in the U.S. has continued to shrink as businesses struggle to find employees for their openings.

"The hope for many to achieve a soft landing is that you meet in the middle, with demand cooling off and labor supply picking up, and we reach a much healthier equilibrium between the two," Michael Pugliese, an economist at Wells Fargo, told the Wall Street Journal Sunday. "But if labor supply flatlines or keeps falling, you need to bring demand down even more in order to cool off wage growth."

According to Labor Department data, the number of workers in the U.S. has fallen 400,000 since March, a troubling sign after the number of workers approached prepandemic levels earlier this year. The total labor force is now about 600,000 smaller than it was in early 2020, right before widespread COVID-19 restrictions plunged the economy into a recession.

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The labor shortage has raised fears that the economy will not achieve the "soft landing" many hoped for as restrictions have been lifted, with some economists saying the imbalance between labor supply and demand represents the largest threat to the U.S. economy.

The labor-force participation rate, which counts the percentage of Americans 16-years-old and above that are working or seeking work, ticked down to 62.1% in July after being up to 62.4% earlier this year. The number is also much lower than the 63.4% rate that was recorded before the pandemic, according to the Labor Department.

The shortage has also contributed to nearly four-decade high inflation, which stood at 8.5% in July. While energy shortages and supply chain issues that fueled inflation last year have begun to subside, those pressures have been replaced by a tight labor market that has seen private-sector wages and salaries grow by 5.7% since last year.

The Fed has tried to slow inflation by raising interest rates, something economists say could also cool demand for labor. Meanwhile, workers currently participating in the labor market are seeing their roles expand as businesses struggle to fill gaps in their organizations.

SHANGHAI SURPRISE: Tesla has now produced more than three million cars, a third of them in China, CEO Elon Musk announced on Sunday. 

"Congrats Giga Shanghai on making millionth car! Total Teslas made now over 3M," Musk tweeted. 

Construction for Tesla's Shanghai factory began in 2018, but the facility has been plagued by shutdowns and other problems in recent years due to the coronavirus pandemic.

Tesla produced 258,000 vehicles in the second quarter, a 15% drop from the 305,000 vehicles that were produced from January through March. 

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Despite that, Tesla said that June was its most productive month on record and the 258,000 vehicles produced was still a 25% year-over-year increase.

By comparison, Toyota produced 8.57 million vehicles worldwide in 2021.

Musk predicted record-setting production in the second half of the year and Tesla is sticking with its prediction of 50% average annual growth in vehicle sales.

ECONOMIC REPORTS DUE: The New York Federal Reserve will kick off this week’s economic reports at 8:30 a.m. ET Monday with a closely watched gauge of regional manufacturing activity.

The Empire State Manufacturing Survey is expected to decline to 5.5 in August, from a stronger-than-expected reading of 11.12 the previous month when it exited contraction territory (a number above zero means that more New York-area manufacturers say business conditions are improving rather than worsening.)

In addition, look for the first of several housing-related reports due out this week. 

At 10 a.m. ET, the National Association of Homebuilders will release its Housing Market Index for August. 

The homebuilder sentiment gauge is anticipated to hold steady at 55, the lowest since May 2020, after tumbling much more than expected to that level last month after high inflation and mortgage rates hurt home sales and buyer traffic. 

It would signal that barely more than half of NAHB members regard business conditions as good. 

Other reports to watch this week are housing starts and building permits on Tuesday, and existing home sales on Thursday, both for the month of July.

EARNINGS REPORTS CONTINUE: A big week coming up for retail earnings, which should give investors a good look at the health of the U.S. consumer and provide some clarity on the impact inflation is having on corporate profits. 

The markets will pay close attention to management guidance for confirmation of recent data showing that inflation has peaked. 

Among the names reporting this week are Dow members Walmart and Home Depot, both Tuesday morning. We’ll hear from their smaller rivals, Target and Lowe’s, on Wednesday.  

Also watch for results from department stores Kohl’s, TJX Cos. (parent of TJ Maxx), and Ross Stores, warehouse club chain BJ’s Wholesale Club and sportswear retailer Foot Locker among others.

More than 90% of the companies in the S&P 500 have reported April-through-June results, with earnings and revenue numbers coming in far ahead of lowered expectations.

MARKETS REVIEW: U.S. stocks rose Friday, with major indexes notching gains for the week as investors cheered signs of a slowdown in inflation. 

The S&P 500 and the Nasdaq Composite both posted their fourth consecutive week of gains. That marked their longest stretch since a streak that ended in early November, when both rose for five weeks in a row. 

Investors hope a recent deceleration in consumer-price growth will encourage the Federal Reserve to raise interest rates at a slower pace, which in turn could prevent the economy from tipping into a recession. 

Lower rates tend to boost prices for stocks, bonds and more speculative assets like cryptocurrencies, and stocks have swooned this year in part because of the Fed's aggressive rate increases. 

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Though inflation is still near the highest it has been in decades, data Wednesday showed that it had eased, clocking in at 8.5% in July compared with 9.1% in June. 

Data on Thursday showed U.S. suppliers raised prices in July at the slowest annual pace since last fall, buoyed by a drop in energy prices. 

On Friday, the S&P 500 climbed 72.88 points, or 1.7%, to 4280.15. The Nasdaq Composite jumped 267.27 points, or 2.1%, to 13047.19. The Dow Jones Industrial Average rose 424.38 points, or 1.3%, to 33761.05. 

The Dow rose 2.9% for the week. The Nasdaq and the S&P 500 were up more than 3% for the week.