Morning Brief – All About Jobs

Markets are braced for the monthly jobs number today, with some traders braced for the worst after Private payrolls grew by just 132,000 for the month, marking a deceleration from the 268,000 gains in July.

The US labour market has been a standout when it comes to US economic data this year. This is going to be put to the test, as payrolls have been doing well even as weekly jobless claims hit an eight month high earlier this month.

Expectations are for 290,000 jobs to be added, however given how much forecasts missed in July one must question how reliable these estimates are likely to be, especially after last month’s strong number.

Last month’s payrolls report was doubly impressive given that consensus expectations were for the lowest number this year, and what we got was over double forecasts, at 528,000.

This week’s Weekly jobless claims fell 5,000 to 232,000, while Continuing claims increase 26,000 to 1.438 million. Layoffs announced by US-based firms drop 21% in August, marking a potential yellow-flag for jobs bears today.

Factory activity also remains steady in August, as the ISM employment rebounded. The US ISM Manufacturing report for August came aligned with July’s figure at 52.8.

The August ISM market the second lowest reading since June 2020. However, the fact it increased alludes to more Federal Reserve tightening policy.

This may rubber stamp the possibility of a 75-basis rate hike when the US Federal Reserve next meets in September. This is why we are seeing the current market reaction since Thursday.

If today’s number comes in strong or weak I think that the US dollar index will still perform well. I think the fact that Chair Powell laid out his position at Jackson Hole regarding his plans, alludes to more greenback gains.

Just a side note, if we see the jobs number turn negative today then we could see the US dollar index falling as a negative headline number would be a disaster for the FED.

Current data does not suggest that this scenario is in anyway likely. However, I think it is prudent to lay out the absolute worst-case scenario ahead.