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LivestreamMenuJuly’s jobs report took Wall Street by surprise on Friday — and seemed to take some pressure off the Federal Reserve to hike interest rates in September. Nonfarm payrolls dropped by a seasonally adjusted 23,000 last month, while economists surveyed by Dow Jones were expecting a gain of 83,000. “This is a pretty horrendous report,” said Adam Crisafulli, founder and president of Vital Knowledge.” The silver lining (in the immediate term) for stocks is that the implications of this report are very dovish for monetary policy, which should push yields lower, although the Fed will face a big dilemma if employment continues to weaken while inflation stays elevated.” The market liked what it saw. Stock futures rose and Treasury yields fell as traders bet the weak report would stop the Fed from hiking rates at its policy meeting next month. Based on where fed funds futures are trading, the market now sees a 44% chance of a rate hike in September, down from 55% on Thursday ago, according to the CME FedWatch tool. Here’s what investors, strategists and economists across Wall Street had to say about the report: Lindsay Rosner, head of multi sector fixed income investing at Goldman Sachs Asset Management: “History doesn’t repeat, but sometimes it rhymes. For the third time in as many years, July jobs data saw a mid-summer loss of momentum. While incoming inflation data will be the ultimate arbiter, slowing jobs growth helps support a September hold.” Saira Malik, Nuveen chief investment officer: “For the job market this is a number that’s not booming and may actually be breaking, but for the markets the two biggest areas of concern were yields and inflation. This lower number helps not reinforce the Fed’s narrative that they need to raise interest rates.” Ryan Weldon, Investment Director and Portfolio Manager at IFM Investors: “This print will give the Fed a little more breathing room as it heads to the September meeting with a credibility problem on the inflation side. Softening core inflation and reduced slack in the employment market will give the Fed a little more comfort to hold rates while it monitors how the data evolves over the next few quarters.” Jerry Tempelman, former senior analyst at the NY Fed and VP of economic and fixed income research at Mutual of America Capital Management: ” July inflation reports show signs of moderation, yet persistent energy costs from ongoing Middle East tensions continue to put upward pressure on prices for households and businesses. Despite moderate gains in consumer confidence last week, spending patterns continue to diverge along income lines, as higher-income households continue to benefit from strong financial market gains, while lower-income households in particular face budget concerns from elevated energy prices and tariff-driven cost increases that have constrained discretionary spending.” Sonu Varghese, Carson Group’s chief macro strategist: “Headline payrolls were really disappointing, with 23,000 jobs lost in July. But the weakness was concentrated in local government, largely due to school-calendar seasonal effects, and leisure and hospitality as the World Cup boost rolled off. The bigger picture is that unemployment fell to 4.1%, its lowest in a year. Combined with low initial jobless claims, that suggests the labor market remains in solid shape despite the volatility in payrolls.” Eric Merlis, co-head of global markets at Citizens : “The Fed was questioned for not tightening last month, but Chairman Warsh has been rewarded for his patience in the short term. The weak print and softer wage growth should cool bets on a rate hike heading into Jackson Hole later this month.” Jeff Schulze, head of economic and market strategy at ClearBridge Investments : “[T]oday’s headline jobs number is not as worrying as it might first appear, with a -50k drag from the local government education sector. This is a typical seasonal development with the end of the school year that is usually reversed come fall suggesting that underlying job creation remained modestly positive. Job creation for the private sector was +30k. Richard Fisher, former Dallas Fed President: [T]he labor situation is better than I expected, than many people expected. We’re actually holding up fairly well, but again, look at the rate of increase of wages. It’s been dampening, and I think that will affect consumer behavior. In addition to having the kind of inflationary pressure that consumers are feeling, so I’m not that disappointed in these numbers.” Bradford Smith, portfolio manager at Janus Henderson Investors: “Despite one weak jobs print, the economy remains strong and corporate earnings remain very robust as evidenced by the strong growth seen in this quarter’s earnings reports from the private sector. Volatility in the jobs report has become the norm leaving less focus from the Fed on one datapoint. The market focus will quickly shift to the CPI report next week.” Peter Boockvar, chief investment officer at One Point BFG Wealth Partners: “Job growth was soft last year and has rebounded this year but today reflects some loss of momentum. Concerning is the continued decline in the participation rate, though ironically [it] is keeping the unemployment rate from rising.” Ian Lyngen, head of U.S. rates strategy at BMO Capital Markets: “When combined with the June payrolls print, July’s NFP report points to underlying downward pressure in the labor market as opposed to simply a one-off, noisy release. It will be difficult for the market to fully dismiss the shift in momentum in the jobs market.”Read More
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