*Despite the weaker-than-expected headline figures, the data for the two previous months were raised from initial readings. June job gains were lifted to 962,000 from 938,000 and July job gains were raised to 1.05 million from 943,000.*
*On top of that wages grew for the month. Average hourly earnings, month-over-month, rose 0.6% versus 0.3% expected and 0.4% in July. On a year-over-year basis, wages rose 4.3%, compared with 3.9% expected and 4.0% last month.*
*Friday’s jobs report showed a significant slowing in hiring, but a surge in wage growth, which is a worrisome combination for the economy. Slow economic growth and rising inflation is the worst case scenario for the economy.*
While the economist anticipates that third-quarter economic growth will be slower than expected as COVID weighs on employment growth and consumer spending, he believes the economic recovery will remain “sturdy” and inflation will decelerate. “We hold overweight to equities and underweight to fixed income,” he said, who is a member of Wilmington’s investment committee.
Meanwhile, the jobs report may raise questions about whether the Federal Reserve could delay its long-anticipated plan to start dialing back asset purchases and other policies that have been viewed as accommodative.
*Fed Chairman Jerome Powell has signaled that the central bank would use employment as a key indicator while it considers the end of its pandemic-era measures to add liquidity to markets.*
*After having indicated a taper was likely in the next few months, August payrolls perhaps throws that into disarray. Of course, inflation has been running at multi-decade highs, and has clearly met the ‘substantial further progress’ test—yet that doesn’t appear to have made sufficient an impression on the Fed.*
*President Joe Biden in a news conference Friday on the jobs report blamed the lower-than-expected headline number on the coronavirus delta variant but said the pace of job creation still represents growth.*
*“Some wanted to see a larger number today, and so did I,” Biden said. “But what we’ve seen is continued growth month after month. We’ve added jobs in every single one of my first seven jobs report,” the president said. “This is the kind of growth that makes our economy stronger. Consistent progress, not boom or bust.”*
*In the press conference on Friday, President Joe Biden touted the average monthly job gains since he took office and lower weekly jobless claims, and called for more vaccinations and for Congress to pass infrastructure and budget bills. Biden also said states should consider using federal relief money to extend enhanced unemployment benefits, which expire this week.*
*“Even with the progress we’ve made, we’re not where we need to be in our economic recovery,” Biden said.*
Wednesday’s private-sector ADP jobs report also fell far short of expectations. “With their conviction that inflation will ultimately prove transitory, the Fed is currently much more focused on the employment recovery, implying that today’s very weak number will likely sway the Fed to a November taper, if not later,”.
*Despite a Labor report number well outside the consensus estimate, the overall reaction of investors was muted, continuing a trend over the last year of a decoupling of significant S&P movement in the wake of a wide miss on the payrolls report.*
*In other data, a reading of activity in the services sector from the Institute for Supply Management, the ISM services survey, fell to 61.7 in August from a record 64.1. “The services sector is still holding on,”. “It’s still in strong growth territory.”*
*The U.S. stock market’s direction will be tied to the delta variant, which is a “speed bump” in the economic recovery. With trading volume set to pick up after Labor Day, investors will look through any near-term weakness as long as the delta-infection curve is heading down.*
By: via @AlliesFin Serve Stock Market
