In the morning following the biggest market pullback in nearly 3 months, early trading indexes swung to the positive on a better-than-expected Employment Situation from the U.S. Bureau of Labor Statistics (BLS) non-farm payroll survey for August. A total of 1.37 million jobs were generated last month, topping the 1.2 million analysts were expecting. The Unemployment Rate fell to a much-lower-than-anticipated 8.4%, well off the 9.8% expected and 10.2% reported for July.
The private sector brought in 1.027 million jobs in August, meaning the government had a rather extraordinary bump of 344K positions created, 251K on the federal side — likely related to the 2020 census positions (which can be expected to start rolling off in future months). This marks the single-largest group of new jobs last month, followed by the 248K from Retail Trade. Leisure/Hospitality brought in 174K, and Education/Health Services had 147K.
Importantly, the Temporary Layoff composite for August came down by 3.1 million positions, to now 6 million overall. While this still spells work ahead to put Americans back to their normal jobs — they have not been jettisoned from their positions, but the positions themselves do not yet have work assigned, leading to Temporary Layoff status — this is a big chunk of employment relief on the overall picture. Consider that at the peak of the pandemic we were looking at 18 million Americans on Temporary Layoff; we’ve now cut this down by two-thirds.
Revisions to the previous two months came down a tad: July now shows 1.734 million jobs created from 1.763 million initially reported; June went from the original number 4.79 million to 4.78 million in the latest read. Overall, we’re still down around 11.5 million positions from those lost in March and April this year. Even though 8.4% unemployment is far better than we were expecting, it’s far from where we need to be for a robust labor market.
Another positive note came from Average Hourly Earnings, which was +0.4% from an expected flat read, and doubled the +0.2% we saw for July. This means that not only are jobs returning in aggregate, but they’re also increasing in terms of wages.
One note of caution: the expiration of the CARES Act in late July still had relief checks mailed out to out-of-work Americans during the month of August. But the longer we go without Congress reaching a new deal, the more likely we are to see a hit to monthly jobs figures in the months to come. That said, now that we are seeing a notable recovery, perhaps this will lead those in the House and Senate negotiations to more easily reach a compromise.
The Nasdaq is still lagging on the news, but the Dow simply loves it: the blue-chip industry of 30 stocks went from narrowly in the red prior to the BLS report to up 220 points a half hour before the bell. The S&P 500 has also swung to slight gains on the news. The Nasdaq, while still down double-digits, looks as though it may have the capacity to claw back to the green after the opening bell.
Regardless where the market closes today, a three-day weekend will allow for all of these numbers to be digested more completely. As we embark on the coming autumn months, we look toward Q3 earnings season in just over a month. We also have a momentous General Election to contend with in November, which may provide repercussions for the broader stock market.
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