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Softer Hiring Could Delay Fed Tapering; Futures Slip

The U.S. economy added back 235,000 jobs in August as hiring slowed amid the latest Covid wave and related supply-chain snags. The disappointing report could delay the timing of Fed tapering. The unemployment rate fell to 5.2%. Dow Jones futures were volatile early Friday stock market action after the jobs report.




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Private-sector payrolls rose 243,000 in August, while government jobs fell 8,000.

Wall Street expected the August jobs report to show a gain of 740,000 jobs overall, including 693,000 private-sector jobs. Economists expected the unemployment rate to ease to 5.2% from July’s 5.4%.

Job gains for June and July were revised up by a combined 134,000. July’s initially reported 943,000 gain was revised to 1.053 million.

The softer job gains come as 26 states have tried to coax reluctant workers back into the job market by ending emergency jobless benefits that are providing an extra $300 per week. Pandemic jobless benefits are set to end nationwide on Labor Day.

Meanwhile, companies have continued to bid for an apparent short supply of workers, despite still-elevated unemployment. On Thursday, Walmart (WMT) said its giving 565,000 of its workers at least a $1-an-hour pay hike, bringing its average wage to $16.40. Economists say high worker turnover, as workers voluntarily quit to search for greener pastures, is contributing to staffing challenges. Some are calling it “the great resignation.”

Dow Jones, Treasury Yields React To Jobs Report

Futures were volatile after the jobs report.

Dow Jones futures, up slightly before the 8:30 a.m. ET jobs report, moved to little changed. The Dow Jones closed within 1% of a record high on Thursday.

S&P 500 futures and Nasdaq 100 futures edged higher in up-and-down action. The S&P 500 and Nasdaq composite both hit new record highs on Thursday.

Strong earnings and low bond yields have been a powerful combination for the the stock market. The Dow is up 16% this year, the S&P 500 21% and the Nasdaq 19%.

After Friday’s jobs report, the 10-year Treasury yield rose 3 basis points to 1.32%.

So far, Wall Street is exhibiting little concern about the approaching shift in Federal Reserve policy. Fed chief Jerome Powell said last week that he’s inclined to begin tapering asset purchases, now $120 billion per month, later this year.

Economists are expecting an announcement to that effect as the Fed wraps in next meeting on Sept. 22. Friday’s jobs report probably could change the timing. Powell has stressed that the current burst of inflation should prove transitory, allowing the Fed to be patient before.

Be sure to read IBD’s The Big Picture column after each trading day to get the latest on the stock market trend and whether investors have a green light for buying quality stocks at a proper entry point.

Jobs Report Details

Hiring ground to a halt, with zero jobs gained in the leisure and hospitality sector, which had added 415,000 jobs in July. Factory employment grew by 37,000. Retailers shed 28,500 jobs.

Construction jobs slipped by 3,000. Health care and social assistance payrolls fell 4,6000.

Unemployment

The household survey, which is used to derive the unemployment rate, showed the ranks of the employed rising by 509,000, while the unemployed declined by 318,000. The ranks of Americans not in the labor force fell by 49,000.

According to the monthly survey of households, 8.4 million Americans are unemployed, down from 23.1 million in April 2020, but up from 5.8 million in February 2020.

Please follow Jed Graham on Twitter at @IBD_JGraham for coverage of economic policy and financial markets.

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