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Big Jobs Miss Could Delay Fed Taper; Futures Volatile

The U.S. economy added back just 235,000 jobs in August as hiring slowed sharply amid the latest Covid wave. The disappointing report could delay the timing of Federal Reserve’s decision to taper asset purchases. Still, the unemployment rate fell to 5.2% and wage growth surprised on the upside. The Dow Jones turned slightly lower in 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%.

Average hourly wage growth of 0.6% in August doubled the 0.3% expected monthly gain. Annual wage growth accelerated to 4.3% from 4% in July.

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

The softer August 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

The Dow Jones pointed slightly higher before the 8:30 a.m. ET jobs report, but traded down about 0.2% after the opening bell. The S&P 500 and Nasdaq composite also eased about 0.2%.

The S&P 500 and Nasdaq composite both hit new record highs on Thursday, while the Dow Jones closed about 1% shy of a record.

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 4 basis points to 1.33%. That may reflect the possible inflationary implications of strong wage growth.

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

Economists were expecting a taper announcement at the Fed’s next meeting on Sept. 21-22. But Friday’s jobs report could delay the announcement by a month or so. Powell has stressed that the current burst of inflation should prove transitory, allowing the Fed to be patient before raising interest rates.

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

In the leisure and hospitality sector, hiring ground to a halt with zero jobs gained after adding 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 4,600.

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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