August Jobs Numbers and Another Read on Consumer Confidence
August Jobs Numbers and Another Read on Consumer Confidence
With Jackson Hole now in the virtual rearview mirror, the market will turn to some economic numbers to ascertain when the Fed may start to institute tapering. While the September 22 FOMC meeting could have a taper announcement it’s more likely to come at the November or December meetings. The expectation is that the August jobs report will prove a bit softer than July but still solid, nonetheless. The August expectation is for a gain of 750 thousand jobs versus 943 thousand in July with the unemployment rate dropping from 5.4% to 5.2%. In July, the broader underemployment rate continued lower as well dipping to 9.2% but it was as low as 6.8% in December 2019 and that is what the Fed will be looking to get back to before hailing the recovery as complete. If the report disappoints at all it will certainly forestall a tapering statement in September but it seems likely, unless jobs numbers really fall out of bed, that tapering will kick-off later this year with a finish sometime in mid-to-late 2022. Other reports this week will give the market an early read on August activity and both ISM Manufacturing and Services are expected to post solid results, but a bit less than the levels in July. After the last University of Michigan Sentiment reading dropped to levels last seen a decade ago the Conference Board’s Consumer Confidence number will be watched for confirmation. Expectations are for some backtracking but not to the degree seen with Michigan’s numbers.
|Treasury Curve||Today||Week Change|
|3 Mo LIBOR||0.12%|
|6 Mo LIBOR||0.15%|
|12 Mo LIBOR||0.24%|
|Date||Statistic||For||Briefing Forecast||Market Expects||Prior|
|Aug 30||Pending Home Sales||Jul||0.5%||0.3%||-1.9%|
|Aug 31||S&P CoreLogic Home Prices (YoY)||Jun||18.6%||18.6%||17.0%|
|Aug 31||Consumer Confidence||Aug||123.0||123.0||129.1|
|Aug 31||ADP Employment Change||Aug||650k||625k||330k|
|Sep 1||ISM Manufacturing||Aug||58.5||58.5||59.5|
|Sep 3||Change in Nonfarm Payrolls||Aug||750k||750k||943k|
|Sep 3||Unemployment Rate||Aug||5.2%||5.2%||5.4%|
|Sep 3||Labor Force Participation||Aug||61.8%||61.8%||61.7%|
|Sep 3||ISM Services Index||Aug||62.0||62.0||64.1|
Top 5 Events for the Week
August 30—September 3, 2021
1. August Employment Report— Friday
While the market remains fixated on the latest tapering talk, the August jobs report will be a key component in assessing how quickly we are returning to something approaching a pre-pandemic labor market that the Fed, (and particularly Powell) are looking for. With 7 million or so jobs still missing from payrolls there is still a lot of ground to make up. The August expectation is for a gain of 750 thousand jobs versus 943 thousand in July with the unemployment rate dropping from 5.4% to 5.2%. The broader underemployment rate continued lower as well dipping to 9.2% but it was as low as 6.8% in December 2019 and that is what the Fed will be looking to get back to before hailing the recovery as complete.
2. August ISM Manufacturing Index- Wednesday
In addition to the employment numbers, we get another early tell on August in the form of the ISM Manufacturing Survey on Wednesday. The ISM Manufacturing Index is expected to post a 58.5 versus 59.5 in July indicating the manufacturing sector is expected to remain in solid expansionary territory which has been the case since June 2020. The latest readings have plateaued around the 60-level but some of that is from of a lack of parts, namely chips for autos. With those shortages still weighing on the sector sub-60 prints are likely but looking through those temporary shortages the sector still seems very healthy.
3. August ISM Services Index—Friday
After the ISM Manufacturing Index on Wednesday, the ISM Services Index will try to impress investors on Friday with an expected print of 62.0 versus 64.1 in July. Markets have been waiting for a hand-off of sorts from the goods side of the economy to the services side and the latest GDP numbers did show some of that occurring but with rising virus counts there is some concern the so-called hand-off will be lower and slower with less growth than was anticipated just a month ago. If the August print comes as expected it will be just shy of the all-time high reading of 63.7 set in March. That seems to suggest the services-side of the economy is still in a very healthy state.
4. August Consumer Confidence—Tuesday
With two-thirds of the economy consumption-based it’s always important to look at the confidence of the consumer for tells on future spending and hence GDP. The latest University of Michigan reading on sentiment dropped significantly lower as inflation concerns were often cited. For August, the Conference Board’s confidence reading is expected to turn lower to 123.0 versus 129.1 in July. Confidence levels, however, are still near the pre-pandemic highs in the 130’s so a little turn lower from these pretty lofty levels is nothing to get too worried about. The expected solid read on confidence points to steady consumer consumption in the months ahead.
5. July Pending Home Sales -Monday
Pending home sales are based on contract signings so they represent a good real-time tell on the state of the housing market and for July sales are expected increase 0.3% after dipping –1.9% in June. Thus, activity is expected to rebound a bit in July after a surprising dip in June that can be blamed on lack of inventory and rising prices.
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