Live Markets: Jobs report drill-down: Soft, yes, but 50-basis-points soft?

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06/09/2024 16:44

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    JOBS REPORT DRILL-DOWN: SOFT, YES, BUT 50-BASIS-POINTS SOFT?
    Market participants got what they were waiting for on
Friday, in the form of the Labor Department's hotly anticipated
employment report. 
    As for those betting on the size of the Fed's rate cut this
month, the mixed report provided fodder for both the doves and
the hawks.        
    The U.S. economy added 142,000 jobs  USNFAR=ECI  last month,
or 11.3% fewer than analysts expected. 
    This stands on the shoulders of July's downwardly revised
89,000 job gains (the originally stated 114,000 was low enough
to convince investors that the sky was falling and prompt a
steep sell-off, one might recall).
    It marks the third consecutive month that payrolls fell
short of estimates, and the fourth of the last five that landed
south of the 200,000 mark.
    Digging below the topline, the service sector was
responsible for 91.5% of the 118,000 total private job adds,
with manufacturing and retail sectors shedding 24,000 and
11,100, respectively.
    "The labor market is cooling at a measured pace," writes
Jeffrey Roach, chief economist at LPL Financial. "Shortly after
this release, markets were pricing in a slightly higher chance
of a 50 basis point cut at the next Fed meeting compared to
yesterday’s pricing." 
    "However, our view is the Fed will likely cut by 25 basis
points and reserve the right to be more aggressive in the last
two meetings of the year," Roach adds.
    At last glance, financial markets have baked in a 51%
likelihood of a 50 basis point rate cut at its upcoming
September meeting, and a 41% chance of a super-sized 50 bp
decrease, according to CME's FedWatch tool.
    But as hiring cools, wage growth is heating up.
    Average hourly earnings growth rose on monthly and annual
bases by 0.4% and 3.8%, respectively. 
    Both readings were 20 basis points hotter than consensus.
    But remember, retail and manufacturing jobs - usually not
the highest paying gigs - actually decreased last month, which
could have pushed average hourly wages higher.
    At any rate, it's the first taste of August inflation and it
reiterates the notion that while the overall trend is back
toward Powell & Co's 2% annual target, the road is strewn with
rocks and detours.
    The unemployment rate  USUNR=ECI  ticked down to 4.2% from
4.3% as expected, even as the labor market participation rate
held firm at 62.7%.
    This suggests that while the labor market is evidently
cooling, it's not exactly sailing over a cliff, which gives the
Fed some latitude regarding the size of its expected rate cut at
this month's policy meeting.  
    "The speed at which the Fed will travel with regards to
policy rates remains unclear," says Charlie Ripley, senior
investment strategist at Allianz Investment Management.
"Investors remain divided on how quickly the Fed should lower
rates and the mixed employment data today did not augment the
argument for either side, which is why the odds of a 50 basis
point cut at the September meeting looks like a coin toss for
now."
    Broken down by duration, the freshly unemployed saw their
slice of the total jobless pie increase, from 33.0% to 34.3%,
lending some cred to Thursday's jump in planned layoffs as
reported by Challenger Gray.
    Average unemployment duration inched higher though, to 20.8
weeks from 19.6, hinting at the possibility that jobs aren't as
plentiful anymore, echoing the Conference Board's most recent
Consumer Confidence report.
    Viewed by race/ethnicity, the Black unemployment rate dipped
20 basis points to 6.1%, while White joblessness held firm at
3.8%, resulting in a 0.2 percentage point narrowing of the
White/Black jobless gap.
    Unemployment among Asian Americans and those who identify as
Hispanic jumped higher; to 4.3% and 5.5%, respectively.
     
    (Stephen Culp)
    *****    
   
    FRIDAY'S EARLIER LIVE MARKETS POSTS:
    
    ETHEREUM, ANY TAKERS? - CLICK HERE
    
    S&P 500 E-MINIS NEAR FLAT, PARE LOSSES AFTER US PAYROLLS -
CLICK HERE

    "BINARY" OUTCOME LIKELY FOR JOBS REPORT - CLICK HERE
    
    THE BARNIER EFFECT - CLICK HERE
    
    STOXX 600 FALLS BEFORE PAYROLLS TEST - CLICK HERE
    
    EUROPEAN FUTURES SLIP BEFORE HOTLY ANTICIPATED JOBS REPORT -
CLICK HERE
    
        ALL ABOUT THEM PAYROLLS - CLICK HERE
    

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
premarket snapshot    https://tmsnrt.rs/4cYhhSJ
Nonfarm payrolls    https://reut.rs/3AUseHC
Inflation gauges    https://reut.rs/3Xykm7y
Labor market participation    https://reut.rs/4egWElT
Unemployment by duration    https://reut.rs/3XyHrqQ
Unemployment by race and ethnicity    https://reut.rs/4cXW2Ay
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>