Jobs Report Is (Very) Bad News For Fed

One thought on “Jobs Report Is (Very) Bad News For Fed”

1. While there was obvious focus on headline NFP of 263k and the AHE, on balance there is still some signs within the report that show reasons to believe in the labour market slowdown is far more advanced that 263k or indeed, the recent 3m and 6m averages of those numbers. Most analysts ignore the HH survey numbers because they are so volatile. However, they are more useful if you smooth them out. For example ahead of the 2007 recession, there was a discrepancy of weak HH vs Establishment jobs numbers, this is happening again, since March there are hardly any jobs created in HH survey. One theory is that the NFP uses the birth/death adjustment. Over a mult-year period this is entirely sensible, but it may not be sensible at turns in the labour market to assume that the number a new firms creating new jobs is related to old firms closing up and letting go of workers. Another thing to take note of is hours worked declined and so did Temp workers, both are considered leading indicators for NFP. Finally on wages–the surge–it might be worth digging into this to see if there are distribution issues impacting the headline. For example if a lot of those at the lower end dropped out, it would push of the average. To be clear, I do not know if this happened, but it deserves a closer look. On balance , I see the NFP as more neutral or even a little more concerning for the outlook than most, altough, I am not in the recession camp at all. But this does add weight to pressing down on seasonal, justifying it by saying peak hawkishness has come and gone—think Nov 1994–where terminal rate discounted peaked at 6.5% but the Fed did hike one more time in Feb 1995 to 6.0%.