U.S. employment report
Really? Stock index futures paired substantial losses following the release of the July jobs report, which in the event delivered a below consensus 209,000 new positions (consensus called for 230,000). The prior two months saw net revisions that added a further 15,000 positions to the pot, while the headline unemployment rate rose by a tad to 6.2%. That stocks should rise on the relief of a weaker than expected reading, possibly because it is a bond friendly report, suggests investors are clutching at the safety net of easier for longer Fed policy. However, the basis of Thursday’s worst day of the year was probably less centered on falling bond prices and had more to do with geopolitics and global equity price weakness. It all seems rather odd that stock futures have just about eliminated a double-digit slide ahead of the number.
Within the data job growth was boosted by professional positions, which rose by 47,000 and among manufacturers (+28,000) and retailers (+27,000). Unlike the earlier ADP reflection of private payrolls (+318,000), the BLS showed the construction industry added a sizable number of workers (+22,000). The ADP report showed only 12,000 jobs were added and the fewest since August.
The biggest growing concern that seems to be unsettling investors these days, concerned by an earlier Fed exit, seems to be how a tightening labor market must result in faster wage growth and inflation. However, those individuals have to wait, at least according to this report. The average hourly work week remained at 34.5 hours, where it has been since March, while monthly earnings were flat and stand 2.0% higher than a year ago.
Chart: Key payroll gains