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Have Jobs Slowed Enough for the Fed to Pause?
Last week offered plenty of macro data for traders (and the Fed) to consider. Core PCE remains stubbornly higher at 4.2% YoY – moving higher month on month. However, there is signs of a slowing labor force – with job additions missing expectations. The question is whether the jobs market is now slowing enough for the Fed to end rate hikes? For example, total unemployment is very strong at 3.8% and there are almost 9M open jobs. That’s not a weak labor market…
One Trend That Isn’t Sustainable
More “bad news is good news” hit the tape today… The monthly ADP private jobs number came in far weaker than expected. I say ‘good news’ as it potentially means less Fed (or at least that’s the assumption). Here’s CNBC: “Job creation in the United States slowed more than expected in August, according to ADP, a sign that the surprisingly resilient U.S. economy might be starting to ease under pressure from higher interest rates”
For Now… Bad News is Good News
August has proven to be a bumpy month for equities. And if the Trader’s Almanac is any guide – it’s not surprising. August and September are typically weaker months for stocks. For example, over the past decade, the S&P 500 has managed an average gain of 0.1% for August. Dismal. If you go back two decades, it becomes an average loss of 0.1%. Why? Maybe it’s due to most of Wall Street taking summer vacation in The Hamptons – meaning trading volumes are low. Or it could be some traders locking in profits ahead of September – which boasts the worst record of any month in the calendar. For example, the S&P 500 has lost an average of 1% each September over the past 10 years.
“Navigating by the Stars Under Cloudy Skies”
Today Fed Chair Jay Powell offered his latest sentiment on the economy and monetary policy from the Jackson Hole Summit. Whilst he leant hawkish (my expectation) – he also admitted he doesn’t know what’s ahead. Nothing wrong with that… better decision making starts by first recognizing what we don’t (or can’t) know. Powell stated “… as is often the case, we are navigating by the stars under cloudy skies”. Question is – what does that mean for markets and rates ahead?