Does The Jobs Report Change Anything?

The first Friday of a new month means one thing: The Jobs report. Viewed by many as the most important economic report of the month, the data on nonfarm payrolls and unemployment for August surprised to the downside.

The Labor Department reported that the economy created 156,000 new jobs last month, which was below the Reuters consensus for 180,000.

The unemployment rate, which had been expected to hold steady at 4.3%, instead rose a tenth of a percent to 4.4%.

The next important stat in this report is wage growth. The report indicated that workers’ pay increased by 0.1%, which also missed expectations by a tenth. Over the past year, wage growth has increased at a rate of 2.5%, which is a solid number.

The report showed that the nation’s private sector gained 165,000 jobs in August. This was below both the consensus estimates and the ADP report, which sported job growth of 237,000 last month.

As usual, there were revisions to the prior two months’ job growth. July’s total was cut by 20,000 from 209,000 from 189,000 while June was revised to 210,000 from 231,000. This means the current three-month average for job growth stands at 185,000.

It is important to note that August payroll numbers have tended to be volatile due to seasonal distortions. CNBC reports that August numbers often come in weak at the first reading only to be revised higher down the road. For example, in 2011, the initial reading for job growth came in at zero, but was later revised to 104,000. In 2016, the first report showed 151,000, while the final number was 176,000. Thus, we probably shouldn’t get too worked up about the so-called “misses” in today’s report.

Analysts have been watching the economic data more closely of late due to the belief that the economy could be accelerating. This week’s GDP report, which showed the economy growing at a rate of 3% versus the consensus for a rate of 2.7% is Exhibit A here.

From my seat, today’s jobs report doesn’t negatively impact this theme. Nor does the report change the view of what Janet Yellen’s bunch is expected to do next (i.e. begin reducing the Fed’s balance sheet at this month’s meeting and then continue returning rates toward “normal” levels later in the year). And it is for this reason that stock futures are little changed after the report and pointing to a higher open on Wall Street.