Back to top

Image: Bigstock

Jobs Numbers Helping the Fed Thread the Needle: 315K, 3.7%

Read MoreHide Full Article

Friday, September 2, 2022

Count the August print for non-farm payroll totals this morning as another piece of good economic news, even as the headline numbers roll back notably from July’s robust results: 315K new jobs created last month is -200K+ lower than the downwardly revised 526K from the previous read. The Unemployment Rate bumped up 20 basis points (bps) to 3.7%, but this is off levels not seen in 50 years.

Average Hourly Earnings remain in positive territory, but are also moderating month over month: +0.3% versus +0.5% posted for July. Labor Force Participation grew to 62.4% overall, 82.8% in the key 25-54 year-old metric — which is another good sign. We saw a jump in the labor force of 800K positions, and these are all data points we — and the Fed — want to see in order to successfully defeat inflation without driving the economy into recession.

By industry, we saw Professional/Business Services come in at 68K, followed by Healthcare at 48K, Retail posted a strong 44K, and Manufacturing brought in a respectable 22K new jobs last month. Curiously, Leisure & Hospitality, which had been leading the pack in monthly jobs numbers since the Great Reopening got started, came in with 31K new positions in July — a third of what it was averaging through the first seven months of 2022. This can be seen as good news, as well: there’s only so long the economy can piggyback off just one industry for job growth.

And just because we’re off the 600-700K new jobs created we saw in 2021 and the early part of this year does not mean we’re slowing to a stop: over a quarter-million new jobs created in any month is nothing to sneeze at. The past three months, with both the July and June tallies revised downward, averaged 376K, which is not too shabby. Further, should we see this deceleration continue (and, discounting the coming holiday temporary hires, we may) and the Unemployment Rate rise, keep in mind we have some room to maneuver before the labor market grinds to a halt.

All of this is to say the domestic workforce is doing its part, incrementally, to help the Fed thread the needle. The job is far from over, as Fed Chair Powell made explicitly clear one week ago, but the “win” is still in sight. Once these key economic data figures cool off gradually (but not too gradually), it may eventually give the signal to the Fed to lower the rate of interest rate hikes or, dare I say? pause at a reasonable level and let the economy do its thing. This is my long way of saying we might be closer to staying pat at 3.5% for a while, instead of necessarily ratcheting up to a 4% Fed funds rate by the end of this year.

That said, we’re still only at 2.25%, so there are still at least a couple wheels to crank. The debate will continue as to whether September will see a 50 or 75 bps rate hike, but really the bigger question is where the Fed’s going to stop — and how soon before we get there? So far, these incremental Fed moves have been well thought-through and seriously taken; perhaps Powell oversold this a tad late last week, but once we’re all on the same page about what needs to happen, we’ll probably be OK.

The opening bell enjoyed this news quite a bit, opening +269 points on the Dow, +39 on the S&P 500 and +113 points on the Nasdaq. We’ve clearly dug ourselves a new hole, selling off heavily over the past several trading days, so even though this is a nice little pop, it’s not brought us back to recent highs yet — not even close. Volume is likely very low, too, based on the Labor Day holiday unofficially getting underway for plenty of market participants, so a heavy-duty rally today is probably out of the question.

But the clouds still look like they’re starting to part, and we’ll take it. Have a Happy Labor Day Weekend, everybody!

Questions or comments about this article and/or its author? Click here>>


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


Invesco QQQ (QQQ) - free report >>

SPDR S&P 500 ETF (SPY) - free report >>

SPDR Dow Jones Industrial Average ETF (DIA) - free report >>

Published in