August’s jobs report was a disappointment. But it didn’t mean all that much to the stock market.
Paul Hennessy/SOPA Images/LightRocket/Getty Images
Sometimes, what you see is what you get. That wasn’t the case with the August payrolls report.
At first glance, the number was a massive disappointment. The U.S. economy added just 235,000 jobs last month, well below the 750,000 consensus and even beneath the lowest estimate of 400,000. The immediate narrative was obvious—growth is slowing, the job market is stagnating, and the recovery just isn’t happening quickly enough.
But dig a little deeper, and all was not as it seemed. The 0.6% month-over-month increase in average hourly earnings pointed to continued inflation, while the upward revisions to June and July employment numbers, which went to 976,000 and 1.1 million, respectively, suggested that perhaps the figures weren’t quite as weak as they looked. That just about no jobs were created in the leisure and hospitality industry indicated that the Covid-19 Delta variant might have been a bit of a problem.
By the end of the day, it didn’t seem to mean all that much as the S&P 500
closed down 1.52 points on the day, ending the week at 4,535. Still, the jobs report was held up as either a sign of trouble ahead or a signal that there’s nothing to worry about. The numbers could be a reason, in other words, for the Fed to be cautious on the start of tapering or a signal that the central bank should start paring its bond-buying ASAP. “People will find data to support their narrative,” says Hedgeye’s Keith McCullough.
But which narrative? These days, it can feel impossible to choose, which is, I suppose, why Morgan Stanley strategist Mike Wilson laid out two opposing views in a note released this past week. On the one hand, the Fed looks at the incoming data, particularly on inflation and the potential for peaking Delta variant cases, and decides it’s time to taper. Wilson suspects that Jerome Powell & Co. could start the process by winter, and when it does, interest rates would rise, stock valuations would fall, and the market would drop 10%, even though financial shares could benefit.
On the other hand, a growth slowdown could also be in the offing due to sagging consumer confidence and the fact that so much demand has been pulled forward. And if growth surprises too much to the downside, it too could cause the market to finally correct, something that would cause healthcare and consumer-staples stocks to outperform.
Is the Stock Market in a Bubble? Don’t Bet on It.
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August’s jobs report was a disappointment. But it didn’t mean all that much to the stock market.
Paul Hennessy/SOPA Images/LightRocket/Getty Images
Sometimes, what you see is what you get. That wasn’t the case with the August payrolls report.
At first glance, the number was a massive disappointment. The U.S. economy added just 235,000 jobs last month, well below the 750,000 consensus and even beneath the lowest estimate of 400,000. The immediate narrative was obvious—growth is slowing, the job market is stagnating, and the recovery just isn’t happening quickly enough.
But dig a little deeper, and all was not as it seemed. The 0.6% month-over-month increase in average hourly earnings pointed to continued inflation, while the upward revisions to June and July employment numbers, which went to 976,000 and 1.1 million, respectively, suggested that perhaps the figures weren’t quite as weak as they looked. That just about no jobs were created in the leisure and hospitality industry indicated that the Covid-19 Delta variant might have been a bit of a problem.
By the end of the day, it didn’t seem to mean all that much as the
S&P 500
closed down 1.52 points on the day, ending the week at 4,535. Still, the jobs report was held up as either a sign of trouble ahead or a signal that there’s nothing to worry about. The numbers could be a reason, in other words, for the Fed to be cautious on the start of tapering or a signal that the central bank should start paring its bond-buying ASAP. “People will find data to support their narrative,” says Hedgeye’s Keith McCullough.
But which narrative? These days, it can feel impossible to choose, which is, I suppose, why Morgan Stanley strategist Mike Wilson laid out two opposing views in a note released this past week. On the one hand, the Fed looks at the incoming data, particularly on inflation and the potential for peaking Delta variant cases, and decides it’s time to taper. Wilson suspects that Jerome Powell & Co. could start the process by winter, and when it does, interest rates would rise, stock valuations would fall, and the market would drop 10%, even though financial shares could benefit.
On the other hand, a growth slowdown could also be in the offing due to sagging consumer confidence and the fact that so much demand has been pulled forward. And if growth surprises too much to the downside, it too could cause the market to finally correct, something that would cause healthcare and consumer-staples stocks to outperform.
“Bottom line, this fall…
Read More: Is the Stock Market in a Bubble? Don’t Bet on It.