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HOME > Our View >Page One >Nonfarm Payrolls Miss Masks...
Page One Archive
Last Update: 03-Aug-18 09:01 ET
Nonfarm Payrolls Miss Masks Another Goldilocks Jobs Report

Thursday was a big day for the market as Apple's push to a $1 trillion market capitalization overshadowed the reported trade concerns that clipped stock prices when the opening bell rang.  It didn't hurt matters either that the 2800 level in the S&P 500 acted as a key support level once again.

So, what does today bring?  Everyone's guess is as good as the next person's, because you just don't know until you know.

The start of today's session is anticipated to be relatively mixed.   The S&P futures are down one point and are trading in-line with fair value.  The Nasdaq 100 futures are down two points and the Dow Jones Industrial Average futures are down 28 points.

Things were looking a little more positive, but then two things happened: (1) a headline hit indicating China is planning tariffs ranging from 5% to 25% on roughly $60 billion of imported goods from the U.S. if the U.S. implements a 25% tariff on $200 billion worth of imported Chinese goods and (2) the Employment Situation Report for July was released.

Briefly, the "trade concern" chatter will be in the mix of reasons for the futures market getting reined in, as China's stance makes it clear it isn't going to be intimidated by U.S. trade action.  At the same time, though, China's recalcitrant position should not come as a surprise.

In terms of the Employment Situation Report, it presented a headline miss on nonfarm payrolls, yet that got smoothed out by the upward revisions to nonfarm payroll gains for May and June.  To that end, the 3-month average for nonfarm payroll gains moved up to 224,000 from 211,000 prior to the revisions.

Some will be inclined to suggest that the headline miss on nonfarm payrolls in July is indicative of a tight labor market where it is getting hard to find qualified workers and/or a burgeoning sign of some hiring softness due to tariff concerns.

The key takeaway from the report, though, is that it is essentially the same Goldilocks report the market cheered in June when accounting for the revisions and the fact that the year-over-year increase in average hourly earnings held steady at 2.7%.

The implication is that it will keep the Fed on a gradual tightening path.

The notable headlines from the Employment Situation Report are as follows:

  • July nonfarm payrolls increased by 157,000 (Briefing.com consensus 190,000). Over the past three months, job gains have averaged 224,000 per month
    • June nonfarm payrolls revised to 248,000 from 213,000
    • May nonfarm payrolls revised to 268,000 from 244,000
  • July private sector payrolls increased by 170,000 (Briefing.com consensus 187,000)
    • June private sector payrolls revised to 234,000 from 202,000
    • May private sector payrolls revised to 260,000 from 239,000
  • July unemployment rate was 3.9% (Briefing.com consensus 3.9%) versus 4.0% in June
    • Persons unemployed for 27 weeks or more accounted for 22.7% of the unemployed versus 23.0% in June
    • The U6 unemployment rate, which accounts for unemployed and underemployed workers, was 7.5%, versus 7.8% in June
  • July average hourly earnings were up 0.26% (Briefing.com consensus +0.3%), after increasing 0.15% in June
    • Over the last 12 months, average hourly earnings have risen 2.7%, versus 2.7% for the 12 months ending in June
  • The average workweek in July was 34.5 hours (Briefing.com consensus 34.5) versus 34.6 hours in June
    • July manufacturing workweek unchanged at 40.9 hours
    • Factory overtime unchanged at 3.5 hours
  • The labor force participation rate was 62.9% in July, versus 62.9% in June

Separately, the U.S. trade deficit widened to $46.3 billion in June (Briefing.com consensus -$45.6 billion) from an upwardly revised $43.1 billion (from -$43.2 billion) in May.

June exports were $1.5 billion less than May exports while June imports were $1.6 billion more than May imports.

--Patrick J. O'Hare, Briefing.com

Thursday was a big day for the market as Apple's push to a $1 trillion market capitalization overshadowed the reported trade concerns that clipped
 
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