A few quick takeaways from this morning’s payroll report:
- Non-farm payroll for August 2022 grew by +315,000, right in line with the +318,000 estimate. It’s actually an aberration that it came in so close to the estimate. These are complex statistical models prone to be off in any one month by hundreds of thousands of expected jobs. Revised August numbers announced next month will be more telling if the economic slowdown underway is impacting/hitting the labor market.
- The unemployment rate grew (finally) by +.2% to 3.7%, the highest reading in the past year. Labor participation rate on the uptick – more people are coming back into the labor market and that’s a good thing on many fronts. I think we’d need to see unemployment grow to >4% before anyone can call this economy in recession.
- Wages grew but not as much as estimates were predicting. Average hourly earnings grew by +.3% for August and are up +5.2% over the trailing 12 months. Those are both robust numbers and indicative of a tight labor market, but they both are .10% below estimates.
Conclusion: The good news is that the unemployment rate went up a little and wage growth was less than expected. That sounds strange but the market is looking for labor weakness and wage weakness to start taking place. “Bad” now equals “good”. That’s why SP500 futures are up modestly this morning after the report and why the front end of the UST yield curve is down a little in terms of yields. The bad news is that there is nothing in this labor report that will stop the Fed from hiking rates 75bps at their September meeting. Not enough labor demand has been destroyed yet. That’s going to take a few more months. The timing of a weak/soft/negative labor report will coincide with the Fed’s moment of “pausing”. That’s unlikely to happen prior to November.
Chief Investment Officer
Congress Wealth Management LLC (“Congress”) is a registered investment advisor with the U.S. Securities and Exchange Commission (“SEC”). For additional information, please visit our website at www.congresswealth.com or visit the Investment Adviser Public Disclosure website at www.adviserinfo.sec.gov by searching with Congress’ CRD #310873.
This note is provided for informational purposes only. Congress believes this information to be accurate and reliable but does not warrant it as to completeness or accuracy. This note may include candid statements, opinions and/or forecasts, including those regarding investment strategies and economic This note is provided for informational purposes only. Congress believes this information to be accurate and reliable but does not warrant it as to completeness or accuracy. This note may include candid statements, opinions and/or forecasts, including those regarding investment strategies and economic and market conditions; however, there is no guarantee that such statements, opinions and/or forecasts will prove to be correct. All such expressions of opinions or forecasts are subject to change without notice. Any projections, targets or estimates are forward looking statements and are based on Congress’ research, analysis, and assumption. Due to rapidly changing market conditions and the complexity of investment decisions, supplemental information and other sources may be required to make informed investment decisions based on your individual investment objectives and suitability specifications. This note is not a complete analysis of all material facts respecting any issuer, industry or security or of your investment objectives, parameters, needs or financial situation, and therefore is not a sufficient basis alone on which to base an investment decision. Clients should seek financial advice regarding the appropriateness of investing in any security or investment strategy discussed or recommended in this note. No portion of this note is to be construed as a solicitation to buy or sell a security or the provision of personalized investment, tax or legal advice. Investing entails the risk of loss of principal.