Morning Report: Weak job growth

Vital Statistics:

  Last Change
S&P futures 4,539 4.2
Oil (WTI) 70.24 0.25
10 year government bond yield   1.33%
30 year fixed rate mortgage   3.05%

Stocks are flattish after a weak jobs report. Bonds and MBS are down.


The economy added 235,000 jobs in August, which was way below the Street expectations of 740,000. It looks like the driver for the miss was leisure and hospitality, which added zero jobs in August, after adding 400k in June and July. Retail also fell, which is surprising given that we should be seeing the boost of seasonal hiring as we head into back-to-school and the holidays. Total nonfarm employment has risen by 17 million since April of 2020, however we are still about 5 million jobs below pre-pandemic levels. The two-month revision was up 134,000 which was a small positive.

The unemployment rate fell to 5.2%. The labor force participation rate was flat at 61.7% and the employment-population ratio ticked up 0.1% to 58.5%. Average hourly earnings rose 0.6% MOM and 4.3% YOY. This was again well above Street expectations, but I suspect the surprises in leisure / hospitality and retail hiring were playing a part in the numbers.

Overall, it looks like the Delta variant is depressing leisure and hospitality hiring, which makes perfect sense. It is still hard to reconcile the lack of job growth in that sector with all the “help wanted” signs out there. The labor market of the last year has been an anomaly to say the least.

The punch line is that I think we will see the Street (and the Fed) begin to take down Q3 GDP numbers, and I wouldn’t be surprised if the Fed Funds Futures begin cutting their probability estimates for a rate hike next year.

I doubt that the jobs report will affect the tapering decision, and I think the Fed will gradually begin to cut its purchases of mortgage backed securities. While MBS spreads widened significantly during the 2013 taper tantrum, I don’t think that is in the cards this time around. I think in 2013 the market expected that the Fed might sell its holdings into the market. That isn’t going to happen this time around – heck the Fed decided that even letting the portfolio run off naturally was having too big of a negative effect on the economy. So I think they will gradually reduce purchases and will almost assuredly re-invest maturing proceeds back into the market.

Where does that leave interest rates? The Fed’s projected path of inflation and interest rates was based on an assumption that economic growth would accelerate into the end of the year and through 2022. Given the economic data we have been seeing, that doesn’t seem to be materializing. If we decelerate and begin having recession fears, I suspect the 10 year yield will fall and during the next recession we will join our brethren like German and Japan in the subzero club.


The housing market is becoming slightly more favorable to buyers, as soaring prices are decreasing demand. “The housing market has clearly become slightly more favorable to buyers,” said Redfin Chief Economist Daryl Fairweather. “Homes are taking longer to sell, which gives buyers more time to make thoughtful decisions about whether to make offers. Home prices have plateaued, so buyers shouldn’t feel rushed to buy before prices rise further. And the fact that more sellers are dropping their list price is a sign that sellers have to be realistic about their price expectations.”



55 Responses

  1. Fight the motherfucking power!

    Strike one against the hierarchy!


  2. This recent book was The Economist’s book of the year.

    Irreversible Damage: The Transgender Craze Seducing Our Daughters is a 2020 book by Abigail Shrier

    I have begun to read it. Whatever the reasons for gender dysphoria, I have some hope this will shed some light. However, Shrier has become a whipping girl for the loony left. An ACLU officer thought the book should be banned. ACLU, formerly protector of the First Amendment, now fighting to be among the woke book burners.

    Not being an admirer of government overreach and humorless bureaucracy and their handmaidens,the puritans of the far left and far right, who preach “my way or the highway”, and further, thinking that outrage politics, whether from the burglars of the Capitol Building or the burners in Portland or the School Boards that don’t want to teach about slavery or the school boards that think the teachers must be woke I will continue to play critic, whether against the loony left or the loony right.


    • The authoritarian left was all for free speech until they got power. Then they want to silence dissent.

      I still chuckle every time i see some dipshit with a “defund the police” sign and a hammer and sickle t-shirt. They have no concept what sort of police state is required to enforce “equity.”


    • Mark:

      This recent book was The Economist’s book of the year.

      I suggested that you read this very book 6 months ago.

      Glad you are getting around to it. It is very enlightening. Hopefully it will lead you to be less sanguine about this topic than you have been.


    • Concur, although what bothers me at present is the ascendency of the loony left in terms of cultural and institutional power. I fully expect the Texas law to ultimate be done away with—- in lower courts, in the SCOTUS, it is certainly being universally condemned through all the megaphones of entertainment, celebrity and big tech. We’re this something meant to target Christians object to vaccine mandates or something, there would be no media/entertainment/institutional cabal to act as a check and balance on the loony left.

      I don’t know there’s any great way to address it. Or possible way. But I expect that extremes tend to overestimate their power and competence and the manifest destiny of their mission, so eventually implode. So fingers crossed on that!


    • Mark:

      … the School Boards that don’t want to teach about slavery…

      I haven’t heard about this. Which school boards are pushing back against teaching about slavery?


      • the ones on the new netflix or disney series


        • That sounds about right to me. The “loony right” exists as caricatured villains in woke fiction, while the “loony left” literally sits in Congress and the Oval Office.


        • The left is labeling those States and school districts (and the parents who support the efforts) that are banning CRT as slavery deniers, claiming they are refusing to teach about slavery and Jim Crow.


        • They are lying, in other words.


        • I think a “loony right” is a really thing (just spend enough time on Gab) but the loony right has next to no institutional or cultural power, which makes them about as dangerous as a hoard of kittens. The loony left, however …


        • KW:

          I think a “loony right” is a really thing (just spend enough time on Gab) but the loony right has next to no institutional or cultural power

          Mark seems to think otherwise. School boards exercise institutional power, and he thinks there are school boards that don’t want to teach students about slavery. I am still genuinely curious which school boards he has in mind.


        • Let’s say the loony right controls a handful of rural school boards. I don’t know—-it’s entirely possible. So the loony right then has an iron grip on .01% of the nation’s school boards. And a dozen schools teach intelligent design in a science class.

          That’s not institutional power, that’s an aberration that the entire rest of the culture militates against. So it’s no actual power.

          In most cases state boards of education set curriculum requirements and most of these aren’t right wing organizations and even if they demand a traditionalist education (nobody is leaving out slavery or Jim Crow to my knowledge) local urban districts do everything they can to get around it. There are curriculum vendors who provide products specifically to funnel in wokeism around the cracks. Individual teachers routinely ignore prescribed curriculum and teach their own personal politics. That’s institutional power. Where is that from the right in the present day? I’m not seeing it.

          Not saying it doesn’t exist—but if and when it does it is vanishingly small and in the present day has very little traction or power. And I include the non-loony and center-right in that “no institutional power” assessment.


        • KW:

          nobody is leaving out slavery or Jim Crow to my knowledge

          Nor to my knowledge. But perhaps Mark is aware of something we are not aware of. I am curious.


      • I’m not aware of any. They just don’t want to teach that America was founded on slavery and because of slavery because the people here loved slavery so much!


  3. Peak 2021:


  4. Joe Biden, science denier:

    “I respect them, those who believe life begins at the moment of conception and all, I respect that. Don’t agree, but I respect that.”

    I wonder what other plain, scientific facts Biden denies.


  5. Odd:

    Attorney General Merrick Garland issued a statement on Monday threatening federal action to stop enforcement of Texas’ new law that bans most abortions after cardiac activity can be detected in the womb. Garland also said his department was investigating other legal options to challenge the law.

    “While the Justice Department urgently explores all options to challenge Texas SB8 in order to protect the constitutional rights of women and other persons, including access to an abortion, we will continue to protect those seeking to obtain or provide reproductive health services pursuant to our criminal and civil enforcement of the FACE Act, 18 U.S.C. § 248,” Garland said.

    Women?!? Doesn’t he mean “birthing people”?


    • > Women?!? Doesn’t he mean “birthing people”?

      The problem with going full-woke is you eventually start getting tripped up at every step, painting yourself into a corner.

      I’m dubious that the “birthing people” thing is going to last. Going to be hard to get the vast majority of mothers to go along with striking the word “mother” from our vocabulary. Good luck to those who try to have “birthing people day sales”.

      Attorney General Merrick Garland issued a statement on Monday threatening federal action to stop enforcement of Texas’ new law that bans most abortions after cardiac activity can be detected in the womb.

      Are they going to address the part of the law that involves making it easier to sue everybody for being tangentially involve in the abortion, or do they like that precedent and are just going to address anything that constitutes an abortion ban?


      • KW:

        Are they going to address the part of the law that involves making it easier to sue everybody for being tangentially involve in the abortion…

        I had the same thought when I read that. He says they are going to take steps to oppose the law, but then goes on to detail things that have nothing to do with the law.


  6. Tripwire CEO forced to step down due to tweet declaring himself pro-life and expressing support for SCOTUS ruling on the new Texan abortion law.

    This just provides balance to all of those pro-choice CEOs that have been forced out of their positions by the loony right.


    • Sure that might have happened in the 1950 or 1960s, if we had Twitter then.

      At present, given the right’s lack of aforementioned institutional power and the left’s ascendency in the same category–don’t go on Twitter and support a right-wing position if you like your job. In most cases.


  7. Thanks goodness that boor Trump is gone and we have an adult back in charge to restore civility and norms to the federal government!


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