- Q1 GDP Growth Jumps 1.1% on Strong Personal Consumption
- A Strong March Leads to a Surge in Chinese GDP in Q1 2023
- Durable Goods Retail Sales Suffer from High Interest Rates and Wary Consumers
- Choppy GDP Means UK Should Avoid Q1 Recession
- Japanese Consumer Confidence Jumps to Highest Level in Over a Year
- The End of Summer Sees the End of Disinflation in Europe
- Labor Market Indicators are Starting to Unify on Easing in Hiring
- Inflation and Tight Financial Conditions Weigh on the German Consumer
- Euro Area Money Supply Contracts for the First Time Since 2010
- Dismal Economic Data Out of Germany
- Core Durable Goods New Orders See Gentle Uptrend in July
- More UK Data Pointing to Q3 Decline
- Whispers of a UK Contraction in Q3
- Japan's Core Inflation Resumes Uptrend in July
- Early July Economic Data Leads to a Sharp Increase in Q3 Growth Expectations
- UK CPI: Energy Inflation Crashes but Services Inflation is Still Sticky
- China's Weak Start to Q3 Means More PBoC Easing
- A Breather for the Eurozone as Inflation Hits Two-Year Low
- Germany's September CPI Report: A Clearer Picture of Inflation Trends
- US Manufacturing Demonstrates Resilience Amidst Volatility in August
- The ECB Prepares to Address Excess Liquidity Through the MRR
- Bank of Japan is Too Optimistic on Inflation
- The Bank of England Pauses in a Near Split Decision
- UK Inflation August Update: A Precursor to the Bank of England's Announcement
- Housing Starts Tumble in August Amid Rising Mortgage Rates
- US Retail Sales Grow at Fastest Monthly Rate Since the Start of the Year
- US Consumer Prices Surge in August Driven by Energy Costs
- August NFIB Survey Showed a Tough Environment for Small Businesses
- All Signs Point to a Weaker Labor Market in August
- Chinese CPI Trying to Buck the Deflation Trend
- Energy Prices Rise but the Core Disinflationary Trend is Maintained in September
- PPI's Quiet Rise and the Energy Elephant in the Room
- Small Businesses Grapple with Inflation and Financial Strain in September
- A Wacky September Jobs Report Shows Strong Labor Market
- A Look at the Fragile US Labor Market Ahead of the Nonfarm Payrolls Report
- Thoughts on GME and This Week in the Stock Market
- Record Home Price Levels Point to Strength in Post-Pandemic Economy
- The Stock Market Looks Overvalued, but It's Probably Not
- China GDP Growth Surpasses Expectations
- President-elect Joe Biden Introduces His "American Rescue Plan"
- Political Polarization Intensifies with Another Impeachment Along Party Lines
- Metal Demand Has a Bright Future in 2021 and Beyond
- What Happened to That US-China Trade Dispute?
- Civil Unrest, A Rising Threat to the 2021 Economy
- What's in the $900 Billion Relief Plan?
Labor Day on Labor Day
September 06, 2021
The Week Behind
It’s Labor Day and it's time to look at labor day. That's right, last week we got an update on the labor market that followed the Fed's central banking conference in Jackson Hole, and with tapering still on schedule, many were wondering if the newest employment gain would get in the way. In addition to that, the report would give an idea of what kind of effect that the Delta variant would have on hiring. According to last week's CotW, August PMIs suggested that the effect might not be that much. However, the generally disappointing report might be evidence to the contrary.
Total nonfarm payroll employment grew by 235,000 in August and the unemployment rate fell -0.2% to 5.2%. While gains were made, the number was well off expectations, short of expectations by about 500,000. Wells Fargo was thoroughly disappointed, calling the report a "major miss at a critical time." For TD Bank, the steep decrease in hiring suggesting that "the risks in the coming months are firmly to the downside" as Delta continues to run rampant in the US. Those risks were made more material for CIBC which stated that it would now more than likely decrease its forecast for H2 GDP growth in the US. These were just three voices of the many that were sharing their disappointment. Many of them are also less sure of a tapering announcement in September.
While the consensus seems to be that the report was a major downer for the outlook of the US economy, we're here to provide a few counterpoints:
- While the number of job additions was low, there was still a solid drop in permanent job losers. In August, permanently unemployed fell -443,000 compared to -257,000 in July. This was the largest drop since December 2010, larger than all of the declines in permanent unemployment during the pandemic recovery.
- On the other hand, temporary layoffs were essentially flat in August and remain at 1.3 million. Recovery in this category has been quicker than the permanent category, and therefore, acts as the "low hanging fruit" in the labor market. Permanent unemployment can be a more chronic condition.
- While the leisure and hospitality employment gain (the most sensitive to COVID factors) was 0, it wasn't negative. When infections rose at the end of 2020, the leisure and hospitality sector lost -525,000 jobs in two months, and that effect wasn't visible in the August report. This does provide evidence for the efficacy of vaccines in protecting the economy from further decline.
- July and June data was revised upward by a significant amount. The Establishment Survey data for July was revised up from 943,000 to 1.1 million in July and from 850,000 to 962,000 in June. With revisions in these months, there might be reason to believe that August could also get an upward revision. However, it is unlikely the revision would come near expectations.
For all the disappointment that came with the jobs report, it seems unlikely that tapering is going to be delayed. The Fed might be inclined to label the Delta effects at "transitory" just like it did in discussing inflation. The market did not see the Fed getting more dovish as yields were unchanged in trading on Friday of last week. It all kicks off at the September Fed meeting.
Chart of the Week
Temporary layoffs have skyrocketed during the COVID pandemic but were also quick to recover. Permanent job losers have recovered at a slower rate.
The Week Ahead
The Reserve Bank of Australia, the European Central Bank, and the Bank of Canada announce this week representing developed market central banks. These announcements precede the long awaited Federal Reserve meeting in September with tapering expected.