The August jobs report was one of those reports which had something for everyone, which perhaps explains the rather bizarre market reaction to last Friday’s numbers.
Bond yields, as well as the US dollar slid back sharply in the aftermath of the report, however those losses proved to be short-lived, as the US dollar rebounded and yields finished the day higher.
On the headline number the jobs report for August beat expectations, coming in at 187k, however the unemployment rate rose from 3.5% to 3.8%, although part of that can be explained by a rise in the participation rate to 62.8% from 62.6%, putting US worker participation in the workforce at its highest level since the US economy reopened after Covid.
We also saw sharp revisions lower to both the June and July payrolls report, with July revised down to 157k from 187k, while June was revised down from 209k to 105k. Wage growth was also softer at 4.3% pointing to a welcome slowdown as far as the Federal Reserve is concerned when it comes to the narrative surrounding the US economy.
From the Fed’s point of view this is exactly the type of report they would have wanted to see to justify keeping monetary policy unchanged this month. If that trend continues, and there’s no reason to suppose it won’t then it’s quite reasonable to assume that we could well have seen the last of Fed rate hikes for this economic cycle.
This means that the narrative will soon shift to when we can expect the first rate cut, although the late rebound in the US dollar on Friday somewhat runs contrary to that interpretation.
The rebound in yields is probably easier to explain given that they still finished the week quite a bit lower, with the US 2-year yield finishing the day higher, even