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Jobs Report, Revisions Lower: 50 bps Cut in the Cards?
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Friday, September 6th, 2024
This morning, the long-awaited Employment Situation report of non-farm payrolls from the U.S. Bureau of Labor Statistics (BLS) is out, with numbers perhaps stronger than the “whisper number” on Wall Street, but nevertheless weakening over the course of the year. Headline +142K was lower than the consensus +160K expected, but notably higher than the +99K from the ADP (ADP - Free Report) private-sector August payrolls yesterday. The Unemployment Rate ticked down to +4.2%, as expected.
Monthly Jobs Revisions -86K Over Last 2 Months
While the headline BLS figure is -19K below expectations, we also see fairly drastic downward revisions for both June and July. The July headline shrinks from an already-scant +114K to +89K (perhaps more in tune with yesterday’s ADP report), and June’s relatively healthy original +179K has reduced to +118K.
Over the past four months, the average amount of non-farm payroll gains from the BLS is +141K. This is scarcely enough to cover the youngest of the Baby Boomers retiring per month. The previous trailing four-month average? That’s +227K. This demonstrates a clear erosion to the labor market.
BLS Job Gains by Sector
Leading all industries in August’s BLS report is Construction, at +34K, followed closely by Healthcare jobs, +31K. Government jobs — usually more State and Local than Federal — reached +24K last month, which is cancelled out by the -24K jobs lost in Manufacturing. Gone are the days of triple-digit jobs growth in Leisure and Hospitality: for August, this industry filled +17K positions.
Wage Growth and Labor Force Participation Steady
With all this talk of a slimming labor force, we did see some monthly numbers come in a bit higher than expected. Hourly Wages month over month came in at +0.4%, 10 bps above the +0.3% estimate and doubling the +0.2% reported for July. Year over year, wages grew by +3.8%, from +3.7% expected and +3.6% originally reported a month ago.
The Labor Force Participation Rate for August was flat at +62.7% — still no great shakes historically, but not falling off a cliff either. This figure was balanced by a drop in labor force participation of men but a gain in women participation.
Take-Away from Today’s Jobs Numbers
Pre-markets had been holding their breath all week in anticipation of today’s BLS jobs numbers. Ahead of the report’s release, we saw another down-day emerging: -135 points on the Dow, -25 on the S&P 500 and -175 points on the Nasdaq. Since then, the Dow is now +12, the S&P +1 and the Nasdaq still -35 points.
Bond yields, which had been waving a red flag since their initial inversion back in July of 2022 between 2-year and 10-year rates, were in a tussle at around 3.7% on both ahead of the BLS numbers. Right now, the inversion again has been released: the 10-year rate is current +3.68% versus +3.65% on the two-year.
Could this be the bond market betting on a 50 bps cut at the Fed’s next meeting on September 18th? Looks like it, at least from this vista. Odds currently are 50/50 regarding whether the Fed cuts 25 bps (to a range of 5.00-5.25%) or 50 bps (4.75-5.00%).
We still have another Consumer Price Index (CPI) report out next week ahead of the Fed meeting, so officially it’s still too early to tell whether a 50 bps cut is imminent. The shorthand configuration is that the lower the major economic data comes in, the more likely we’ll see a half-point cut mid-month. And there are still two more Fed meetings before the end of 2024. Questions or comments about this article and/or author? Click here>>
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Jobs Report, Revisions Lower: 50 bps Cut in the Cards?
Friday, September 6th, 2024
This morning, the long-awaited Employment Situation report of non-farm payrolls from the U.S. Bureau of Labor Statistics (BLS) is out, with numbers perhaps stronger than the “whisper number” on Wall Street, but nevertheless weakening over the course of the year. Headline +142K was lower than the consensus +160K expected, but notably higher than the +99K from the ADP (ADP - Free Report) private-sector August payrolls yesterday. The Unemployment Rate ticked down to +4.2%, as expected.
Monthly Jobs Revisions -86K Over Last 2 Months
While the headline BLS figure is -19K below expectations, we also see fairly drastic downward revisions for both June and July. The July headline shrinks from an already-scant +114K to +89K (perhaps more in tune with yesterday’s ADP report), and June’s relatively healthy original +179K has reduced to +118K.
Over the past four months, the average amount of non-farm payroll gains from the BLS is +141K. This is scarcely enough to cover the youngest of the Baby Boomers retiring per month. The previous trailing four-month average? That’s +227K. This demonstrates a clear erosion to the labor market.
BLS Job Gains by Sector
Leading all industries in August’s BLS report is Construction, at +34K, followed closely by Healthcare jobs, +31K. Government jobs — usually more State and Local than Federal — reached +24K last month, which is cancelled out by the -24K jobs lost in Manufacturing. Gone are the days of triple-digit jobs growth in Leisure and Hospitality: for August, this industry filled +17K positions.
Wage Growth and Labor Force Participation Steady
With all this talk of a slimming labor force, we did see some monthly numbers come in a bit higher than expected. Hourly Wages month over month came in at +0.4%, 10 bps above the +0.3% estimate and doubling the +0.2% reported for July. Year over year, wages grew by +3.8%, from +3.7% expected and +3.6% originally reported a month ago.
The Labor Force Participation Rate for August was flat at +62.7% — still no great shakes historically, but not falling off a cliff either. This figure was balanced by a drop in labor force participation of men but a gain in women participation.
Take-Away from Today’s Jobs Numbers
Pre-markets had been holding their breath all week in anticipation of today’s BLS jobs numbers. Ahead of the report’s release, we saw another down-day emerging: -135 points on the Dow, -25 on the S&P 500 and -175 points on the Nasdaq. Since then, the Dow is now +12, the S&P +1 and the Nasdaq still -35 points.
Bond yields, which had been waving a red flag since their initial inversion back in July of 2022 between 2-year and 10-year rates, were in a tussle at around 3.7% on both ahead of the BLS numbers. Right now, the inversion again has been released: the 10-year rate is current +3.68% versus +3.65% on the two-year.
Could this be the bond market betting on a 50 bps cut at the Fed’s next meeting on September 18th? Looks like it, at least from this vista. Odds currently are 50/50 regarding whether the Fed cuts 25 bps (to a range of 5.00-5.25%) or 50 bps (4.75-5.00%).
We still have another Consumer Price Index (CPI) report out next week ahead of the Fed meeting, so officially it’s still too early to tell whether a 50 bps cut is imminent. The shorthand configuration is that the lower the major economic data comes in, the more likely we’ll see a half-point cut mid-month. And there are still two more Fed meetings before the end of 2024.
Questions or comments about this article and/or author? Click here>>