Plenty of Positives Remain in Jobs Picture

The August employment report was generally considered a disappointment with headline job growth missing forecasts with 235,000 jobs created versus 733,000 expected. The rise in virus cases gets its fair share of blame, and with Leisure and Hospitality job growth flat versus a 350,000 six-month average, there is a lot to be said for that. However, other bits of data within the report were solid as have been other labor market reports issued this week. Thus, the true state of the labor market may be somewhere in between that portrayed in August and what we saw in  the months leading up to that. In the sections below we point out two reports released this week that continue to paint a very favorable picture of the labor market and that is keeping some Fed voices calling for tapering talks now.

In our podcast this week we speak with Josh Collins VP of Talent and Culture and Ryan Liebowitz, VP of Commercial Lending from Oconee State Bank in Watkinsville, Georgia. The discussion centers around the importance of creating a culture of accountability and purpose and why the two are not mutually exclusive. The iTunes link can be found here and the Spotify here.



Unemployment Claims Numbers Set to Undergo Big Changes in September

After the soft August employment report, expectations for a quick tapering timeline were somewhat dashed but the usual suspects were back in front of microphones continuing to stoke the idea that tapering talks should still be offered up at the September 22 FOMC meeting. St. Louis Fed President James Bullard was not dissuaded after the jobs report and continued to reiterate that tapering should begin sooner rather than later and end early in 2022. While we often make light of Bullard’s hyperbolic calls he may be onto something here. While his is not likely the consensus Fed view, additional readings from the labor market do emit vibrant signs, Delta variant or not. The latest in that regard was the weekly jobless claims numbers which set another pandemic low.


Source: Bloomberg

Initial jobless claims fell by a more-than-forecast 35,000 to 310,000 in the week ended September 4 and compares favorably to the 345,000 claims the prior week. That marks the biggest drop since late June and is a new pandemic low. Continuing claims, which lag initial applications and roughly approximate the pool of total recipients of ongoing benefits, declined to 2.78 million in the week ended August 28 from 2.81 million the prior week, and also set a new pandemic low.

What’s more interesting is that between continuing claims and the emergency programs some 11.7 million people were receiving some form of unemployment assistance in late August. With the expiration of those emergency programs much of those 11.7 million will either have to begin a job search, or do without the supplementary payments. That means that the balance of September will be very informative as to the pace of job creation with the potential for millions of people suddenly looking for employment. Perhaps that shift will occur too late for a taper announcement on September 22, but the November meeting certainly becomes a likely target.

Gab Between Job Openings and Total Unemployed Never Wider

In another sign this week that the labor market is in better condition than my have been surmised by the latest jobs report was the JOLTs data that was released this week. The Job Openings and Labor Turnover Survey is a month behind the BLS jobs report, but the July job openings totaled 10.934 million positions, the highest ever recorded for the survey.


When you compare those 10.9 million job openings with the 8.3 million counted as unemployed in the BLS report the gap between job openings and total unemployed has never been larger as shown by the graph. Consider too that with 11.7 million people receiving some form of unemployment assistance, most of which expired on Labor Day, those 10.9 million job openings may just have more bidders than was the case over the last several months.

That’s why it will be very interesting over the balance of September to see how these numbers swing as many of those persons with expired benefits re-enter the job search market. Of course, the September JOLTS report won’t be available until early November but the weekly continuing claims numbers and the August JOLTS report may start to yield clues before the tectonic shift from September is known. The expectation is rising that many of those job openings will be filled by new entrants forced into the labor force due to expiring benefits and that should lead to hefty job gains in the final quarter of 2021.  That’s why you continue to hear voices like St. Louis Fed President Bullard expressing supreme confidence in the labor market and wanting to get on with tapering. As we said, however, a September announcement is not yet the consensus view but a fair amount of chatter is likely to take place regardless.

Agency Indications — FNMA / FHLMC Callable Rates

Maturity (yrs) 2 Year 3 Year 4 Year 5 Year 10 Year 15 Year
0.25 0.11 0.37 0.64 0.95 1.73 2.19
0.50 0.09 0.35 0.58 0.84 1.59 2.08
1.00 0.09 0.31 0.54 0.80 1.50 1.95
2.00 0.30 0.49 0.72 1.38 NA
3.00 0.67 1.32 NA
4.00 1.27 NA
5.00 1.23 NA
10.00 NA

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Published: 09/09/21 Author: Thomas R. Fitzgerald