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Does the Jobs Data Change Your View?

Nick Kalivas

Here are a few details from the August employment report:

August nonfarm payrolls rose 169,000 [about 180,000 expected].  The revision to June and July was a net down 74,000.  Payrolls were revised to up 104,000 in July and 172,000 in June.

Highlights by sector include: 1) manufacturing employment rose 14,000 2) construction was flat 3) retail increased 44,000 4) temp services rose 13,100 5) finance declined 5,000 6) health and education jumped 43,000 and 6) government rose 17,000.

Average hourly earnings rose 0.2% m/m [in line] and are up 2.23% y/y for production and nonsupervisory employees.  The trend is starting to work higher.  There is a growing uptrend in earnings growth, although it is not strong in real terms.  The labor market is tightening somewhat.

The index of aggregate weekly hours rose 0.4% which is a positive for economic activity and reverses the drop in June.  This part of the data is more consistent with the PMs than the jobs numbers.

The Unemployment Rate fell 0.1% to 7.3% [7.4% expected].  The drop was driven by a decline in the participation rate which fell 0.2% to 63.2.  The number of people not in the labor force surged 516,000, and the civilian labor force shrank 312,000. At the same time, the civilian non-institutional population rose 203,000.

Household survey employment fell 115,000, while the number of unemployed declined 198,000.  There were 866,000 discouraged workers which is about unchanged from last year.  The unemployment rate continues to be pressured by the exit of people from the work force and not robust economic growth.  The not in the labor force measure is up 1.554 mln from a year ago, while the population has grown 2.393 mln.

RTI Questions:

Based on the jobs data are you:  1) more bullish stocks 2) more bearish stocks 3) no change in view?

Based on the jobs data are you: 1) more bullish the 10 year (see lower yields) 2) more bearish the 10 year (see higher yields 3) no change in the 10 year outlook?

Let me know your thoughts below:

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