Weekly Market Update
A full week of jobs data showed that the labor sector continues to slow, while another appreciation report revealed that national home values are still rising. Read on for these stores and more:
Job Creations Revised Lower Again, Part-time Work Rises
August Saw Smallest Private Sector Job Gains Since 2021
Low Hiring and Quit Rates Show Labor Sector Weakness
Holiday Impact on Unemployment Claims
Home Price Gains Continue
Job Creations Revised Lower Again, Part-time Work Rises
The Bureau of Labor Statistics (BLS) reported that there were 142,000 jobs created in August, which was below estimates of 160,000. Negative revisions to June and July shaved 86,000 jobs from those months combined. The unemployment rate fell from 4.3% to 4.2%, but for the wrong reasons as noted below.
What’s the bottom line? There were signs of labor sector weakness throughout this report, as the headline job number was below estimates while year-to-date revisions have cut 365,000 jobs from the data. In addition, the number of part-time workers in August rose by 527,000 while full-time workers fell by 438,000. This means the unemployment rate declined because the data counts people who are working part-time when they could not find full-time opportunities.
The cooling consumer inflation we’ve seen in recent months combined with signs that the job market is slowing have led to growing calls for the Fed to begin cutting their benchmark Fed Funds Rate, which is the overnight borrowing rate for banks. This report was a crucial data point for the Fed ahead of their next meeting on September 18, and the weak report keeps the Fed on track to cut rates at that time.
August Saw Smallest Private Sector Job Gains Since 2021
ADP’s Employment Report showed that private employers added 99,000 new jobs in August versus the 145,000 that had been forecasted, marking the fifth straight month that job creation slowed. Gains in education and health services, construction, and leisure and hospitality were offset by losses seen in the manufacturing, information, and professional and business services sectors.
Small businesses also continue to struggle, as those with fewer than 50 employees lost 9,000 jobs. This is compared to 110,000 new jobs added among medium and large companies combined.
What’s the bottom line? Nela Richardson, Chief Economist for ADP, noted, “The job market's downward drift brought us to slower-than-normal hiring after two years of outsized growth.” She added that “the next indicator to watch is wage growth, which is stabilizing after a dramatic post-pandemic slowdown.”
Low Hiring and Quit Rates Show Labor Sector Weakness
The latest Job Openings and Labor Turnover Survey (JOLTS) showed that job openings fell to 7.7 million in July, well below estimates, as June’s report was also revised lower. The level of job openings continues to moderate and is down almost 13% from July of last year.
The hiring rate rose to 3.5%, which is still near the lowest level since 2013 not including COVID. The quit rate is also low at 2.1%, suggesting there is less poaching from other companies and fewer people feel confident about finding new employment.
What’s the bottom line? We continue to see more weakness in the labor market, with low hiring and a low number of people quitting their jobs. This was also reflected in the latest Job Cuts report from Challenger, Gray & Christmas, which showed that hiring announcements fell to their lowest year-to-date level since Challenger began tracking the metric in 2005.
Holiday Impact on Unemployment Claims
Initial Jobless Claims fell by 5,000 in the latest week, with 227,000 people filing for unemployment benefits for the first time. Continuing Claims dropped by 22,000, as 1.838 million people are still receiving benefits after filing their initial claim.
What’s the bottom line? While Initial Jobless Claims fell to their lowest level since May, the measured week was just before Labor Day, and this could have impacted the data as people often put off filing if they’re traveling or busy for the holiday.
Meanwhile, Continuing Claims have now topped 1.8 million since the start of June, remaining near some of the highest levels seen in recent years. This suggests people are collecting benefits for longer periods of time as new job opportunities have become harder to find.
Home Price Gains Continue
ICE (formerly known as Black Knight) reported that national home values rose 0.2% in July after seasonal adjustment, with their index showing that prices are 3.6% higher than a year ago, down from 4.1% in the previous report.
What’s the bottom line? ICE is not alone in their findings, as home price gains continue to be reported in other major indexes like Case-Shiller, CoreLogic and the Federal Housing Finance Agency. These reports show that housing still proves to be a great investment for wealth creation.
What to Look for This Week
The Fed will be watching closely when crucial inflation data is delivered on Wednesday via August’s Consumer Price Index. The Producer Price Index, which measures wholesale inflation, follows on Thursday along with the latest Jobless Claims data.
Important auctions are also ahead, including the 10-year Note on Wednesday and 30-year Bond on Thursday.
Technical Picture
Mortgage Bonds had a nice rally last week, ending Friday in the middle of a wide range with support at 101.18 and a ceiling of resistance at 101.52. The 10-year ended last week at 3.71%, firmly beneath the 3.8% level, with the next floor at 3.663%.
