The August jobs report showed that hiring remains pretty solid, as employers added 187,000 payroll positions, though gains in the prior two months were revised much lower. The unemployment rate unexpectedly jumped, while wage growth eased. The S&P 500 opened higher in early Friday stock market action after the jobs report, but then struggled as the 10-year Treasury yield climbed.
With the labor market no longer appearing quite as tight, there's a good chance that the Fed has hiked its key interest rate for the last time.
Jobs Report Hits And Misses
Employment gains topped Wall Street's 170,000 forecast. The private-sector added 179,000 positions vs. estimates of 147,000. Meanwhile, government payrolls rose by 8,000.
Economists noted that hiring would have looked stronger, if not for the bankruptcy at trucking firm Yellow, which cost 30,000 jobs. The movie industry is also shedding jobs, including 17,000 last month, amid strikes by the writers and actors unions.
The average hourly wage rose 0.2% on the month, below 0.3% forecasts. Annual wage growth of 4.3% was just below views for a steady 4.4%.
The unemployment rate was expected to hold steady at 3.5% but jumped to 3.8%.
Hiring gains in June and July were revised down by a combined 110,000 jobs. July's initially reported gain of 187,000 was revised to 157,000.
With June's gain cut to just 105,000, job gains have averaged a moderate 150,000 over the past three months. Private-sector hiring has eased to a recent average of 140,000 per month.
Seasonal Adjustment Issue?
The headline job and wage figures come from the Labor Department's monthly survey of employers. The separate household survey details labor force participation, work status and the unemployment rate.
Household survey data showed the ranks of the employed rising 222,000 and unemployed growing by 514,000 as 736,000 people joined the labor force. The labor force participation rate, a measure of those working or actively seeking work as a share of the 16-and-up population, rose to 62.8% from 62.6%.
However, it's possible that some of that jump in the ranks of labor force participants and the unemployed reflects seasonal adjustment difficulties amid a return to school. In August 2022, the unemployment rate rose to 3.7% from 3.5%, as 724,000 people joined the labor force. However, labor force participation fell by nearly 200,000 over the next three months.
S&P 500 Reaction
The S&P 500 futures climbed 0.6% at the open after Friday's jobs report. But the S&P 500 turned slightly negative later in the morning and the benchmark index was near the flatline in late afternoon trading.
The S&P 500 powered back above its 50-day moving average, rising 2.3% this week through Thursday, as economic data largely supported Wall Street's view that the Fed has done enough. Job openings tumbled in July, fewer people are quitting their jobs as their confidence in getting a new, higher-paying job dims, and the trend in core inflation dipped below 3% on a three-month annualized basis.
Through Thursday, the 10-year Treasury yield backtracked 15 basis points this week to 4.09%.
Yet on Friday morning, after initially edging lower after the jobs report, the 10-year yield initially edged down, but reversed sharply higher to 4.17%. A strong construction spending report late Friday morning probably contributed to the higher 10-year yield. After the report, S&P Global bumped up its tracking estimate of Q3 GDP growth to 4%.
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Fed Rate Hike Odds
Ahead of the jobs report, markets were pricing in just 11% odds of an additional quarter-point Fed rate hike on Sept. 20, rising to 47% for the Nov. 1 meeting.
Those odds fell to just 7% for a Sept. 20 hike and 41% for a Nov. 1 hike after the report.
More Jobs Report Details
Leisure and hospitality sector employment rose by 40,000. Health care and social assistance employers added 97,000 jobs.
Construction jobs rose by 22,000. Manufacturers added 16,000 jobs.
Soft spots included transportation and warehousing, where payrolls shrank by 34,000, with the Yellow bankruptcy a key contributor. Temporary help services shed 18,900 jobs. Information industries, which includes the strike-hit motion picture industry, cut 15,000 jobs.