Mixed bag here. The headline NFP loss was smaller than expected, but the unemployment rate came in much higher than expected at 9.7% while last months headline loss got revised substantially higher. All in all, I’d say you have to be getting more and more worried about the strength of the recovery if you have high exposure to equities after this run-up. Summary from Econoday:
It’s still ugly but not as ugly. Job losses eased in August while the unemployment rate rose on a reversal of July’s questionable decline. Nonfarm payroll employment in August fell 216,000, following a revised decrease of 276,000 in July and a revised decline of 463,000 in June. The August contraction in jobs was close to the market forecast for a 200,000 dip. July and June revisions were down a net 49,000.
From the household survey, the civilian unemployment rate rebounded to 9.7 percent from 9.4 percent in July and compared to the consensus estimate 9.6 percent. As expected, the labor force increased after an unexpectedly large drop in July. The July number is the one that should be discounted-August is more realistic.
Wage inflation has warmed up a bit-likely due to a jump in the minimum wage. Average hourly earnings in August rose 0.3 percent, matching July’s gain and topping the market forecast for a 0.2 percent increase. The average workweek held steady at 33.1 hours, matching the consensus expectation.
Today’s report was mixed relative to expectations but close for all components. The bottom line is that labor market conditions are very slowly coming out of recession. A key point is “slowly.” Going forward, the consumer sector almost certainly is going to be constrained for some time by high unemployment, job uncertainty, and sluggish income growth (increases in the minimum wage not withstanding).
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.