Macro Investors Have Mixed Feelings on Latest Job Numbers

Global markets sharply rebounded to recover overnight losses early this morning on the release of strong U.S. labor headline statistics, but gave back the gains and plunged to new monthly lows following the New York open.

What’s the Scoop?

• Positive Payrolls: Bureau of Labor Statistics August employment data suggests that the unemployment rate declined slightly from 4.25% to 4.22% last month, driven by labor market expansion of 142k payrolls against expectations for 160k jobs gained. These gains were driven entirely by part-time labor gains, translating to less certainty and lower benefits for the working population.
• Softening Demand: JOLTs Job Openings released Wednesday came in at the lowest level since January 2021, painting a worrying picture of waning labor market demand.
• Cuts Are Coming: According to Goldman Sachs, payrolls below 150k combined with an unemployment rate between 4.20% to 4.29% will elicit a 50 basis point (0.50%) cut to the Federal Reserve’s benchmark interest rate at its September meeting.
• Fed Panic: Fed Governor Waller stated that current data “requires action” and noted that a labor market deteriorating more quickly than expected will result in larger cuts, which he maintained would result in “a greater likelihood of achieving a soft landing.” Waller indicated that he is open to a series of consecutive cuts at successive FOMC meetings and will advocate for “front-loading” cuts if appropriate.

Bankless Take:

Markets are responding to this crop of employment data in an eerily similar fashion to how they behaved on August 2, the Friday directly preceding the worst down day for U.S. stocks since September 2022. Continuation of carry trade unwind is visible in the rapidly strengthening Japanese yen, various nations’ government bonds have been heavily bid throughout the week, and stocks are sliding into the weekend, indicating investor skittishness.