Aftermath of the August Jobs Report
Aftermath of the August Jobs Report
The August Jobs report had a little bit for everyone, hawks and doves. On the dove side the obvious big miss on the headline job growth number led the way. The lowest job gain since January fed the narrative that the increase in delta variant virus cases had slowed growth in the services side of the economy. The leisure and hospitality sector was flat on the month, when it had averaged over 350,000 in gains for the last six months, which certainly generated a compelling cause for concern. Meanwhile, the hawks pointed to the 0.6% monthly gain in wages and over 4.0% year-over-year gain perhaps signaling that the feared wage-inspired inflationary impulse may have arrived.
What will the Fed make of this? We think not much. One report rarely sways monetary policy and with all the noise around economic reports of late we think the Fed is likely to take a wait and see approach to this report. It certainly doesn’t advance the case to outline tapering details at the September FOMC meeting, but it certainly doesn’t forestall a November announcement either. We think they continue to look over the next month or two for confirmation whether job growth is really slowing, or whether August was just a one-off swayed by seasonal summer-end adjustments and outsized delta variant reactions.
|Treasury Curve||Today||Week Change|
|3 Mo LIBOR||0.12%|
|6 Mo LIBOR||0.15%|
|12 Mo LIBOR||0.22%|
|Date||Statistic||For||Briefing Forecast||Market Expects||Prior|
|Sep 8||MBA Mortgage Applications||Sep 3||NA||NA||-2.4%|
|Sep 8||JOLTS Job Openings||Jul||10.000m||10.000m||10.073m|
|Sep 8||Fed Beige Book||NA||NA||NA||NA|
|Sep 9||Initial Jobless Claims||Sep 4||335k||335k||340k|
|Sep 9||Langer Consumer Comfort||Sep 5||NA||NA||58.2|
|Sep 10||PPI (MoM)||Aug||0.6%||0.6%||1.0%|
|Sep 10||Core PPI (MoM)||Aug||0.5%||0.5%||1.0%|
|Sep 10||PPI (YoY)||Aug||8.2%||8.2%||7.8%|
|Sep 10||Core PPI (YoY)||Aug||6.6%||6.6%||6.2%|
Top 5 Events for the Week
September 7—10, 2021
1. Aftermath of the August Employment Report— All Week
The August Jobs report had a little bit for everyone, hawk and dove. On the dove side the obvious big miss on the headline job growth number led the way. The lowest job growth since January fed the narrative that the increase in delta variant virus cases had slowed job growth in the services side of the economy. And with the leisure and hospitality sector flat on the month, when it had averaged over 350,000 in gains for the last six months, certainly creates a compelling case. Meanwhile, hawks pointed to the 0.6% monthly gain in wages and over 4.0% year over year which marked the much feared inflationary impulse from accelerating wages.
What will the Fed make of all this? We think not too much. One report rarely sways monetary policy and with all the noise around economic reports of late we think the Fed is likely to take a wait and see approach to this report. It certainly doesn’t advance the case to outline tapering details at the September FOMC meeting, but it certainly doesn’t forestall a November announcement either. We think they continue to look over the next month or two for confirmation whether job growth is really slowing or whether August was just a one-off swayed by seasonal summer-end adjustments and outsized delta variant reactions.
2. July Job Openings and Labor Turnover Survey- Wednesday
The August jobs reports probably added more noise to signal in regards to the health and direction of the labor market so the July JOLTS Survey will be another data point that investors will look at in assessing the health of the labor market as we work through the increase in virus cases during the summer of 2021. Expectations are that job openings will recede only slightly from the record high in June of 10.073 million to 10.00 million in July. The real issue is that with around 10 million unfilled job openings will the expiration of supplementary unemployment benefits this past weekend start to eat into that number? We think it will but it will likely be a slow and grudging process and just another reason to expect the Fed to be patient in removing accommodative monetary polices.
3. August PPI—Friday
The August PPI numbers will provide additional insight into wholesale and intermediate stage pricing pressures. For the month, the overall price gain is expected to be 0.6% versus 1.0% in July. The core rate (ex-foods and energy) is expected to be up 0.5% versus a 1.0% gain in July. On a year-over-year basis, overall PPI is expected to top out at 8.2% versus 7.8% in July while core PPI is expected to increase to 6.6% year-over-year versus 6.2% in July. Thus, overall and core price pressures are expected to ease some from the strong prints in July on a monthly basis while the year-over-year rates continue to climb given the soft year ago comparisons. The expected dip, however, in the monthly rates are what the Fed will be most focused on.
4. Treasury Auctions—Tuesday/Wednesday/Thursday
The US Treasury will be selling a total of $120 billion in 3-yr ($58b), 10-year ($38b), and 30-year ($24b) debt this week that will be used to repay $60 billion in maturing issues while raising $60 billion in new money. That new debt should keep Treasury prices on the back foot for most of the week until the debt is put away. Recall, the debt ceiling is back in effect at $28.4 trillion so the Treasury will be employing some maneuvers such as disinvesting in various government pension funds to free up borrowing room with the idea that a new debt ceiling will be negotiated by Congress and the funds and interest will be returned to these pension funds. The Treasury still hasn’t offered an estimate on when these accounting maneuvers will be insufficient to keep issuing new debt, but the CBO estimated in July that Treasury could exhaust its capabilities as early as October or November. Expect the debt ceiling debate to become a hot topic in DC once Congress returns from recess.
5. Langer Consumer Comfort Index -Thursday
Consumer confidence has become a central concern since the University of Michigan preliminary August number come in at a decade low print a few weeks ago. Given this week is bereft of many first-tier economic releases we did want to mention a weekly report on consumer attitudes that has been gaining in popularity in recent months. It’s the Langer Consumer Comfort Index that is published weekly. It follows a similar format to the ISM numbers in that 50 is the dividing line between improving and declining sentiment. The prior week’s number was 58.2 but Bloomberg doesn’t publish estimates so it will be another wait and see report.
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