Stocks, Bonds Continue Rally After August U.S. Jobs Report
Stocks, Bonds Continue Rally After August U.S. Jobs Report
While the economy added 7,000 jobs more than were forecasted, the unemployment rate unexpectedly rose to 3.8%
- The US economy added +187,000 jobs in August, higher than the forecast of +170,000.
- The unemployment rate (U3) unexpectedly rose to 3.8%.
- Stocks and bonds continued their bullish momentum that has/had been building in recent days.
A week of trading defined by an intense focus on US labor market data reached its apex on Friday with the release of the August US jobs report.
The nonfarm payrolls report showed a headline gain of +187K versus the consensus forecast of +170K, while the prior reading was revised lower from +187K to +157K. The household employment survey indicated that the unemployment rate (U3) unexpectedly rose to 3.8% from 3.5%. The labor force participation rate increased to 62.8% from 62.6%. Wages (average hourly earnings) eased to +4.3% y/y against an expected rise of +4.4% y/y.
The slight beat relative to expectations on headline jobs growth keeps the US labor market on solid footing. According to the Atlanta Fed Jobs Calculator, the US economy only needs to add +100K jobs per month through the rest of 2023 to keep the unemployment rate at 4% or lower.
The net result has been a continuation of what’s been seen over the course of the week since the release of the July US JOLTs report on Tuesday. Stocks, led by /RTY, hit fresh session highs, while bonds across the curve, from /ZT to /UB, have continued to rally (yields down). The DXY Index fell, led by strength in /6J.
The August US jobs report is about as ‘goldilocks’ as it can get for markets. Steady jobs growth? A rise in the unemployment rate? Moderating wage growth? Higher labor force participation? Check, check, check, and check. The narrative that has been building in recent days – that the Federal Reserve need not raise rates again this cycle – just received a potent piece of evidence in its favor.
Christopher Vecchio, CFA, tastylive’s head of futures and forex, has been trading for nearly 20 years. He has consulted with multinational firms on FX hedging and lectured at Duke Law School on FX derivatives. Vecchio searches for high-convexity opportunities at the crossroads of macroeconomics and global politics. He hosts Futures Power Hour Monday-Friday and Let Me Explain on Tuesdays, and co-hosts Overtime, Monday-Thursday. @cvecchiofx
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