This was a good — but not great — NFP report. In fact, its one of the better reports we’ve seen. It points to an ongoing improving economy, and continued Fed hikes — possibly for the rest of our natural lives, or until the next recession, which ever comes first.
The market is obviously concerned about the ratcheting up of rates, especially now with real rates above zero. As MFR’s Josh Shapiro explained:
"Average hourly earnings were up a m/m 0.4% in July (above market expectations of a 0.2% gain) after increases of 0.2% in the preceding two months. The y/y increase was steady at 2.7%, which continued a string of y/y gains that have been essentially flat for many months. However, the 0.4% m/m change definitely caught the eye of the bond market, and the Fed will be keeping a close eye on wage data in the coming months."
Thats more fuel for the Fed fire.
Since I’ve been such a curmudgeon lately, let’s dissect the data, looking for some hair on the deal:
Here is a Surprise: Temporary Jobs were flat — and have been since
April. We like to see temp work tick up, as cautious employers tend to
use temps prior to hiring. An uptick in temp #s often precedes an
uptick in permanent new hires.
Retail was a solid +50k, which surprises only so far as knowing what we know about the Challenger, Gray data, showing big layoffs in Retail. BTW, Retail in July was not bad — only below Wall St expectations. Maybe the stores that did well (Target, Costco, WalMart) made up for the ones that missed (Abercrombie, Nordstroms, Gap). Perhaps GM Dealers had to hire more bodies to help them give away cars at cost.
A few other items of note: Leisure and hospitality: of the +33k positions, 30k was food and drink; These tend towards lower paying McJobs. Also of note: 26k new Government employees.
Lastly, MS Howell’s & Co. Chief Market Strategist Brian Reynolds notes that Aggregate hours worked were far less than you would expect in a plus 207k report (with 64k upwardly revised new jobs).