The August jobs report showed that hiring was more robust as employers added 187,000 payroll positions, although gains were narrowly revised from the previous two months. The unemployment rate rose unexpectedly, while wage growth slowed. The S&P 500 opened higher in early Friday stock market action after the jobs report, but struggled as the 10-year Treasury yield climbed.
With the labor market no longer looking tight, there’s a good chance the Fed has raised its key interest rate for the last time.
Jobs report successes and failures
Job gains topped Wall Street’s forecast of 170,000. The private sector added 179,000 positions to 147,000 estimates. Meanwhile, government wages rose by 8,000.
Economists noted that hiring would have been stronger had it not been for the bankruptcy of trucking company Yellow, which shed 30,000 jobs. The film industry has lost jobs, including 17,000 last month, amid strikes by writers’ and actors’ unions.
Average hourly wages rose 0.2% in the month, below forecasts of 0.3%. Annual wage growth of 4.3% was lower than views for a steady 4.4%.
The unemployment rate was expected to hold steady at 3.5%, but rose to 3.8%.
Hiring gains in June and July slowed by a combined 110,000 jobs. A gain of 187,000 reported in early July was revised to 157,000.
While June’s gain slowed to just 105,000, job creation averaged 150,000 over the past three months. Private sector hiring fell to an average of 140,000 a month.
Is seasonal adjustment a problem?
The headline employment and wage statistics come from the Labor Department’s monthly survey of employers. A separate household survey describes labor force participation, employment status, and the unemployment rate.
Household survey data showed the number of people in work rose by 222,000 and the number of unemployed rose by 514,000 as 736,000 people joined the labor force. The labor force participation rate, a measure of those working or actively looking for work as a share of the population 16 and over, rose from 62.6% to 62.8%.
However, some of that jump in labor force participants and unemployment ranks likely reflects seasonal adjustment difficulties when they return to school. In August 2022, the unemployment rate rose from 3.5% to 3.7% as 724,000 people joined the labor force. However, labor force participation fell by nearly 200,000 over the next three months.
S&P 500 reaction
S&P 500 futures rose 0.6% at the open after Friday’s jobs report. But the S&P 500 turned slightly negative later in the morning and the benchmark index was near flatline in afternoon trade.
The S&P 500 bounced back above its 50-day moving average, up 2.3% this week through Thursday, as economic data largely supported Wall Street’s view that the Fed has done enough. Job openings fell in July, as fewer people quit their jobs as prospects for finding a new, higher-paying job dimmed, and trend core inflation fell below 3% on a three-month annualized basis.
As of Thursday, the 10-year Treasury yield had retreated 15 basis points this week to 4.09%.
Yet on Friday morning, the 10-year yield edged lower early after the jobs report, but rose sharply to 4.17%. A strong construction spending report late Friday morning may have contributed to the 10-year yield. After the report, S&P Global raised its Q3 GDP growth forecast to 4%.
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Fed Rate Hike Odds
Markets priced in ahead of the jobs report 11% odds An additional quarter-point Fed rate hike on September 20, rising to 47% at the November 1 meeting.
Those odds fell to just 7% for the Sept. 20 hike and 41% for the Nov. 1 hike after the report.
More jobs report details
Leisure and hospitality sector employment increased by 40,000. Health care and social assistance agencies added 97,000 jobs.
Construction jobs rose by 22,000. Manufacturers added 16,000 jobs.
Soft spots included transportation and warehousing, where wages fell by 34,000, with the yellow bankruptcy the main contributor. Temporary help services lost 18,900 jobs. Information industries, including the strike-hit motion picture industry, cut 15,000 jobs.
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