US job creation slowed in Aug, while jobless rate drops below 10%

U.S. job growth slowed further in August as financial assistance from the government ran out, threatening the economy’s recovery from the COVID-19 recession.

Nonfarm payrolls increased by 1.371 million jobs last month after advancing 1.734 million in July, the Labor Department’s closely watched employment report showed on Friday. The unemployment rate fell to 8.4% from 10.2% in July. Economists poll had forecast 1.4 million jobs added in August and the unemployment rate sliding to 9.8%.

U.S. stock futures turned slightly higher in a tight range after the data, U.S. Treasury yields rose as did the U.S. dollar index.

STORY:
MARKET REACTION:
STOCKS: U.S. stock index futures reversed slight losses, with S&P 500 e-minis EScv1 last up 0.25%, pointing to a firmer open

BONDS: Yields on benchmark 10-year notes US10YT=RR rose to 0.6706%; Two-year Treasury yields rose to 0.1349%

FOREX: The dollar index =USD was up 0.3%

COMMENTS:
PETER CARDILLO, CHIEF MARKET ECONOMIST, SPARTAN CAPITAL SECURITIES, NEW YORK“We saw a slight, better uptick in the participation rate. And of course, total unemployment is down to 8.4%, which obviously surprised us.

“It points in the right direction, but still leaves some question marks as 8.4% of unemployment is still a high rate. They certainly point to recovery, but yet a weak recovery. And these numbers could change, because remember, that these numbers are reflecting a month ago and not necessarily what’s taking place right now.

“Yesterday’s market plunge, which was caused by the tech sector, may be a signal that we’re beginning to see rotation come into the market. So if today we see the Dow and the S&P fare better than the Nasdaq, then it’s safe to say that the plunge yesterday was due more to rotation than to any major shift in market sentiment.”

THOMAS SIMONS, MONEY MARKET ECONOMIST AND ANETA MARKOWSKA, CHIEF ECONOMIST, JEFFERIES (IN A RESEARCH NOTE)

“Payrolls rose 1.371M and came in as close to consensus as we have seen in any month since the pandemic began. However, as close as the headline was to expectations, private payrolls generated a fairly wide miss, rising only 1.027M vs consensus of 1.325M. Hiring in the goods-producing sector was somewhat slower than expected, and leisure and hospitality and education hiring slowed fairly sharply. Total government hiring rose 344K, though much of that looks like it was related to Census 2020. AHE was surprisingly strong, up 0.4%, but given the wide shifts in composition month-to-month, it is really difficult to put much stock in the monthly swings in this data. They really do not reflect base wage pressure at this point.”

STEVE RICK, CHIEF ECONOMIST, CUNA MUTUAL GROUP, MADISON, WISCONSIN (SENT BY EMAIL)

“While these numbers are solid, this jobs report still doesn’t have much weight for me – we can’t really put blinders on to the fact that as long as the virus continues to spread without an effective treatment, the economy will continue to struggle.”

RUSSELL PRICE, CHIEF ECONOMIST, AMERIPRISE FINANCIAL SERVICES, TROY, MICHIGAN

“The sharp decline in the unemployment certainly was encouraging but classification issues may have been a challenge for the labor department so we’ll have to look closer at the underlying causes of decline.”

“By the labor department’s own admission they’ve had trouble classifying whether people are furloughed or laid off permanently.”

“The job market recovery has downshifted to a slower pace in the last few months amid the surge in virus cases. There’s still uncertainty about the virus as we go into the fall.”

“Construction employment remains sluggish and still needs to see some improvement. The most significant sector is leisure and hospitality. It grew at a sound rate but there’s still millions of jobs in that sector that need to be recovered.”

“The market was underwhelmed because when you had a significant drop yesterday you’d look for a somewhat of a rebound today. Futures are falling a little”

“Investors are primarily considering that the surge in virus cases slowed down the recovery and we still have virus concerns coming into the fall which may result in the jobs recovery to be slower than previously expected.”

GUY LEBAS, CHIEF FIXED INCOME STRATEGIST, JANNEY CAPITAL MANAGEMENT, PHILADELPHIA

“The headlines were pretty close to expectations, a little bit skewed toward government job gains, which may be related to census hiring. Overall, it continued a rebound in employment.”

“The bond market certainly took it as an economically positive development. The instant response was from a small bit of selling to a large bit of selling within a few seconds.”

JJ KINAHAN, CHIEF MARKET STRATEGIST, TD AMERITRADE, CHICAGO
“Bonds really had the move. The bond market is telling us they really liked the report overall. It is a pretty healthy addition of jobs. Although it is great progress, but then you see something like leisure and hospitality is down 2.5 million jobs since February. Professional and business services still down 1.5 million, retail trade down 655,000. So yes it is great progress but it also shows we still have a long way to go.”

“If I am looking for the most positive thing, it is the gains in transportation and warehousing, when you see that happening it means demand is increasing everywhere and not just people ordering from Amazon. And financial activity with the real estate market, I don’t think is as big a surprise, rental and leasing at this time of the year with September being a big moving month anyway, that is something you would expect to see, but the growth in jobs there is nice to see.”

SAMEER SAMANA, SENIOR GLOBAL MARKET STRATEGIST, WELLS FARGO INVESTMENT INSTITUTE

“Jobs growth came in slightly ahead of expectations, although both the private and manufacturing segments were a little softer than expected. The unemployment and underemployment rates both declined, while the participation rate ticked up and the average workweek lengthened. The data is consistent with an improving labor market that is helping to support consumption, but remains a long ways away from pre-COVID-19 levels.”

“We believe investors should remain fully invested with an emphasis on U.S. large- and mid-caps, and the Information Technology, Consumer Discretionary, Communication Services, and Healthcare sectors.”