August jobs report: Unemployment rises to 3.7%, payrolls increase by 315,000

Yahoo Finance Live anchors Brad Smith and Brian Sozzi break down August jobs report data.

Video Transcript

BRAD SMITH: And let's take a look at some of the expectations for the report here this morning as we are diving in to today's show early of course. As that report is just going to drop in a few minutes from now, we're expecting for farm payrolls to come in at 298,000 in gains. Unemployment, we're expecting that to come in at 3.5%. And then additionally here on average hourly wage, expecting that to move higher by about 5.3%. Brad Smith here with Brian Sozzi on the desk. We've got a lot to cover here ahead of this jobs report. What are you keeping an eye on going in today?

BRIAN SOZZI: Brad, find something amazing. That intro music is so serious. It's such a big deal. Let me go. Let's go. I'm fired up. But look, one thing I'm watching, I think a lot of the murmurs and rumors on the street are looking for a much better than expected jobs report. You just called out that consensus. I would argue a lot of folks are out there are bracing for something over 400,000 on the headline, really coming after that much stronger than expected jobs report last month that in many respects shocked the market.

But let's be clear if that comes over in over 350,000 as Goldman is looking or over 400,000, this could be a market back under pressure here because that will likely raise the odds of a 75 basis point rate hike from the Fed at their September 20th and 21st meeting. One chart I'm watching here right out of the gate is the seasonals in this market. Historically, you could see that chart right there, very interesting, looking at the seasonal patterns here. September historically not good. And again, a stronger than expected jobs report perhaps only feeds that sentiment on September not being good for markets.

BRAD SMITH: Yeah. Keeping an eye on two things here from my perspective. Unemployment rate, of course, if we did come in at what the estimate is, we'd just be staying at that 3.5% unemployment rate. But on the other side of this, you've got to also look at the labor force participation rate and where for some of those jobs, even in a blockbuster report that we had seen last report, last month, we still have this labor force participation rate that actually edged down, ticked down just slightly there.

And so with all of that in mind, we've been rangebound between this 62.1%, upwards of 62.4% as well. So going to be interesting to see where that actually comes in at. And then of course, among the major sectors that we're tracking, where and which sectors, of course, knowing that's the leisure and hospitality sector has been the hardest hit over the course of the pandemic. It's a larger question of where some of those jobs continue to come back, especially as consumers continue to engage with more services than the goods part of the spending economy.

And so with all of that in mind, where has that really netted out in terms of the job additions that have come in on a sector by sector basis?

BRIAN SOZZI: Yeah. And I was talking to our good friend and colleague Ines Ferre. And she mentioned, look out for retail. And I think Ines is right on the mark here because this week, we have seen layoffs from a company like a PVH announcing 10% of its workforce, they're going to wave goodbye to them. Bed Bath Beyond just canning 20% of the workforce. So Ines is very right to highlight the retail sector, which has been slowing down, as something to watch moving forward. Is that a source of job loss in coming months, ahead of the holiday season?

BRAD SMITH: Yeah. And we had the ADP private payrolls number, of course, coming out ahead of the jobs report. And this was the first time that we had actually seen that ADP private payrolls number over the course of this summer because it was so revamped, and they had to look at some of the calculations, the mechanisms that they were using. And those private payrolls grew by just 132,000 in the month of August there.

And so with all of that in mind, is this revamped report that we had seen from ADP, is it actually more of a precursor as to what to expect with the employment situation that the Bureau of Labor Statistics put out. And perhaps, we'll see. This is going to be one of those big tests though for it.

BRIAN SOZZI: It is. Again, we're coming up against the release of the jobs report, of course, just about a minute away. I put a good chart on my LinkedIn page this morning. A good chart from Goldman Sachs showing how a lot of economic data we got throughout August manufacturing, not housing, but primarily manufacturing, was pretty good and supports what could be a stronger than expected jobs report. Interesting chart. Check it out. Cut and paste it. Share it on Twitter.

BRAD SMITH: Yeah, we're tracking also the major averages going into this report. And let's keep a close eye on where we're trending right now versus where we're at after that report drops. As you're seeing, we've seen the NASDAQ futures actually just barely slip into negative territory. As of right now, flat, just barely to the downside by about 10 points. The S&P 500 futures, about as flat as it gets, up by hair on its chinny-chin-chin, 500s of a percent in positive territory. And then you've also got the Dow futures holding on to the slimmest of gains going into this.

Of course, the markets are going to be weighing the data that comes out to really understand if this is a blowout report, if it's a good news, is bad news scenario because that could trigger even more aggressiveness from the Fed as well at their next--

BRIAN SOZZI: Big game vibes, Brad. We're coming up against that clock. You see that countdown clock right there. It feels like our Super Bowl. This is what we live for here at Yahoo Finance. Jobs report today. Let's get ready to get these numbers here, which could have major ramifications for all things markets in the month of September.

And we're getting August payrolls. August payrolls increasing by 315,000. So Brad, you mentioned the consensus was 298,000 coming into this report. Again, Goldman was at 305,000. Non-farm payrolls up 315,000. In August, the unemployment rate rose to 3.7%. But lots to go here through, Brad. You're seeing just initially futures ticking up here in the market, perhaps on the view that this is one of those Goldilocks jobs reports. Not too hot, not too cold as to spark recession fears. Maybe this is exactly what the market needed.

BRAD SMITH: Yeah. A lot to really break down within this report. As you mentioned, non-farm payroll employment, 315,000 jobs added in August, 3.7% on the unemployment rate. But then you dig further into some of what was taking place actually within this data as well and look across some of even the sectors that were watching. It was actually professional and business services adding 68,000 jobs in August. Within the industry, employment gains really occurring in computer systems, design-related services running away with it there within that professional and business services.

Also health care employment. That rose by 48,000 in this most recent quarter. And then retail trade, as you mentioned, something to track as well as Ines highlighting here before we got this report. Retail trade added 44,000 jobs in the month of August. So some of the biggest sector movements that we had seen in this establishment survey data.

BRIAN SOZZI: Just staying with that Goldilocks scenario right off the jump here. So again, so non-farm payrolls beat estimates, but not too hot. You go down, we did see downward revisions to prior months. So jobs for July were revised down by 2,000, and then June was revised down, pretty big here, Brad, down 105,000. So you get the sense that perhaps, the actions taken by the Federal Reserve are starting to weigh on the jobs market, cool things down a little bit as they want to see. And you have this headline jobs report, not as hot as some expected out there in the street, tying it all together. That's probably why you're seeing futures tick higher here nonetheless.