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The Fear Is Real: Pre-Markets Plummet on Jobs Numbers
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Friday, August 2nd, 2024
You can see it in the pre-market charts: once the Employment Situation numbers for July hit the tape, three of the four major indices fell like a stone. Only the blue-chip Dow, still -0.74% points at this hour, has remained on the table. The S&P 500 is -1.77%, the Nasdaq -2.44% and the Russell 2000 -4.26% at this hour.
Fingers Pointing Fed Chair Powell’s Direction
Just as analysts warned months ahead of time that the Fed needed to start raising interest rates as inflation was clearly hitting the economy, those who’d been rattling cages about cutting before employment fell apart are leading the howls this morning. Aggravating this is that the Fed, as per normal, has no August meeting — meaning we’ll have to wait until September 18th to get that first rate cut.
This is not carved in stone, however. Back at the onset of the Covid pandemic, the Fed met twice in March 2020 — at not-previously-scheduled meetings — to slash interest rates to 0-0.25%. Back then, the Fed was acting ahead of critical mass; according to this morning’s hair-on-fire analyses, they’re for the second time way behind it.
Big Drop in U.S. Employment for July
The total amount of jobs created in the U.S. last month, according to the U.S. Bureau of Labor Statistics (BLS), reached 114K. This is well below the 185K consensus estimate and the downwardly revised 179K reported for June. And it’s only the second-worst monthly tally, behind April’s 108K. The trailing 6-month average BLS job gains are now 194K; the 6-month average before this was 225K.
This is also in-line with private-sector payrolls from ADP (ADP - Free Report) on Wednesday, which brought 122K. When we consider the high volume of Baby Boomer retirees in our current climate, we can see these monthly jobs numbers as just breaking even. Even Weekly Jobless Claims figures, on both new and longer-term claims, are both trending to highs not seen in at least a year.
The Unemployment Rate is now 4.3%. While historically pretty benign — and not illustrative of a recession, by the way — it’s definitely moving in the wrong direction. Since May we’ve been at or above 4% unemployment, which is a threshold we’d avoided since January 2022. In fact, today’s 4.3% is the highest rate of unemployment since 4.5% in October 2021.
Under the Hood, Not a Bad Employment Report
This all said, we’re seeing some nice anti-inflationary data in today’s BLS report. Hourly Wages cooled again to +0.2% from +0.3% anticipated. Year over year, wage gains reached +3.6%, a level we’ve not seen since May 2021, and 20 basis points (bps) lower than thew downwardly revised June print. Labor Force Participation, meanwhile, improved to 62.7% (though still 10 bps off near-term highs in November of last year.
Job Gains: Breakdown by Sector
Leading the way in job gains by industry, Healthcare brought in +55K new positions filled. Home healthcare grew by +22K, +20K in Hospitals and +9K in Nursing/Residential Care. Construction continued relatively strong at +25K, with Government furnishing +17K new jobs last month. Info Tech continues to lead job losses, as we saw in the ADP report: -20K jobs lost in July.
What Happens Now?
As we saw back in March 2020, if economic conditions are bad enough, the Fed can and will step in to make adjustments without waiting for their next scheduled meeting. Should we see the domestic labor force grind to a halt — far from guaranteed from one week’s worth of data — we may see Fed Chair Powell gather his troops to make an emergency rate cut.
The smart money currently, however, is a 50 bps drop from the current 5.25-5.50% instead of the more measured 25 bps initially assumed. This hit to employment numbers looks sudden, but has actually been amassing over the past few months. Nobody knows whether things snowball into recession from hear, but that is indeed what all the early selling is about.
Image: Bigstock
The Fear Is Real: Pre-Markets Plummet on Jobs Numbers
Friday, August 2nd, 2024
You can see it in the pre-market charts: once the Employment Situation numbers for July hit the tape, three of the four major indices fell like a stone. Only the blue-chip Dow, still -0.74% points at this hour, has remained on the table. The S&P 500 is -1.77%, the Nasdaq -2.44% and the Russell 2000 -4.26% at this hour.
Fingers Pointing Fed Chair Powell’s Direction
Just as analysts warned months ahead of time that the Fed needed to start raising interest rates as inflation was clearly hitting the economy, those who’d been rattling cages about cutting before employment fell apart are leading the howls this morning. Aggravating this is that the Fed, as per normal, has no August meeting — meaning we’ll have to wait until September 18th to get that first rate cut.
This is not carved in stone, however. Back at the onset of the Covid pandemic, the Fed met twice in March 2020 — at not-previously-scheduled meetings — to slash interest rates to 0-0.25%. Back then, the Fed was acting ahead of critical mass; according to this morning’s hair-on-fire analyses, they’re for the second time way behind it.
Big Drop in U.S. Employment for July
The total amount of jobs created in the U.S. last month, according to the U.S. Bureau of Labor Statistics (BLS), reached 114K. This is well below the 185K consensus estimate and the downwardly revised 179K reported for June. And it’s only the second-worst monthly tally, behind April’s 108K. The trailing 6-month average BLS job gains are now 194K; the 6-month average before this was 225K.
This is also in-line with private-sector payrolls from ADP (ADP - Free Report) on Wednesday, which brought 122K. When we consider the high volume of Baby Boomer retirees in our current climate, we can see these monthly jobs numbers as just breaking even. Even Weekly Jobless Claims figures, on both new and longer-term claims, are both trending to highs not seen in at least a year.
The Unemployment Rate is now 4.3%. While historically pretty benign — and not illustrative of a recession, by the way — it’s definitely moving in the wrong direction. Since May we’ve been at or above 4% unemployment, which is a threshold we’d avoided since January 2022. In fact, today’s 4.3% is the highest rate of unemployment since 4.5% in October 2021.
Under the Hood, Not a Bad Employment Report
This all said, we’re seeing some nice anti-inflationary data in today’s BLS report. Hourly Wages cooled again to +0.2% from +0.3% anticipated. Year over year, wage gains reached +3.6%, a level we’ve not seen since May 2021, and 20 basis points (bps) lower than thew downwardly revised June print. Labor Force Participation, meanwhile, improved to 62.7% (though still 10 bps off near-term highs in November of last year.
Job Gains: Breakdown by Sector
Leading the way in job gains by industry, Healthcare brought in +55K new positions filled. Home healthcare grew by +22K, +20K in Hospitals and +9K in Nursing/Residential Care. Construction continued relatively strong at +25K, with Government furnishing +17K new jobs last month. Info Tech continues to lead job losses, as we saw in the ADP report: -20K jobs lost in July.
What Happens Now?
As we saw back in March 2020, if economic conditions are bad enough, the Fed can and will step in to make adjustments without waiting for their next scheduled meeting. Should we see the domestic labor force grind to a halt — far from guaranteed from one week’s worth of data — we may see Fed Chair Powell gather his troops to make an emergency rate cut.
The smart money currently, however, is a 50 bps drop from the current 5.25-5.50% instead of the more measured 25 bps initially assumed. This hit to employment numbers looks sudden, but has actually been amassing over the past few months. Nobody knows whether things snowball into recession from hear, but that is indeed what all the early selling is about.
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