{"id":195745,"date":"2023-09-01T10:30:00","date_gmt":"2023-09-01T14:30:00","guid":{"rendered":"https:\/\/ibkrcampus.com\/?p=195745"},"modified":"2023-09-01T10:22:46","modified_gmt":"2023-09-01T14:22:46","slug":"softening-employment-situation-in-august-just-what-fed-wants-to-see","status":"publish","type":"post","link":"https:\/\/www.interactivebrokers.com\/campus\/traders-insight\/securities\/macro\/softening-employment-situation-in-august-just-what-fed-wants-to-see\/","title":{"rendered":"Softening Employment Situation In August Just What Fed Wants To See"},"content":{"rendered":"\n

For the Friday before Labor Day weekend, there is actually a good bit of news for the market to chew on. What remains to be seen is just how many participants will take a seat at the table. The participation in this week’s gains hasn’t exactly been robust; nonetheless, this week has been defined by a lack of selling interest amid declining market rates.<\/p>\n\n\n\n

We are seeing more of the same this morning, too. There was a lack of selling interest before the release of the August Employment Situation Report and there has been an increase in buying interest after its release.<\/p>\n\n\n\n

Currently, the S&P 500 futures are up 25 points and are trading 0.6% above fair value, the Nasdaq 100 futures are up 86 points and are trading 0.6% above fair value, and the Dow Jones Industrial Average futures are up 147 points and are trading 0.5% above fair value. The 2-yr note yield, which is more sensitive to changes in the fed funds rate, is down four basis points to 4.82% after sliding to 4.78% immediately after the release of the employment report. The 10-yr note yield is unchanged at 4.09% after dropping to 4.05%.<\/p>\n\n\n\n

The focal points for the futures market were the softening in nonfarm payrolls after accounting for revisions, the jump in the unemployment rate to 3.8%, and the moderation in average hourly earnings growth.<\/p>\n\n\n\n

Altogether the key takeaway from the report is that it was a Goldilocks report as it pertains to the market’s thinking that the Fed won’t be raising rates again.<\/p>\n\n\n\n

There are clear signs of softening in the employment situation, including a decline in temporary positions, an uptick in the percentage of workers unemployed for 27 weeks or more, and a pickup in the U6 unemployment rate, which accounts for underemployed workers. That softening is exactly what the Fed has been expecting to see — and hoping to see — in response to its campaign to get inflation back down to its 2.0% target.<\/p>\n\n\n\n

Yesterday’s core-PCE Price Index for July suggests there is more ground to cover in getting the inflation rate down, yet today’s August employment report should provide the Fed some cover to be patient with its current policy stance.<\/p>\n\n\n\n

Notable headlines from the August Employment Situation Report:<\/p>\n\n\n\n