Weak NFPs Signals No Fed Rate Hike in September

Weak NFPs Signals No Fed Rate Hike in September

Weak NFPs Signals No Fed Rate Hike in September


August Employment Situation and July Trade Deficit: NFPs: 151,000; Private Sector: 126,000; Unemployment Rate; 4.9% Unch; Hourly wages: +0.1%/ Trade Deficit: $5.2-B narrower

Commentary: Given how robust job gains were in June and July, the weak August increase halted the FOMC actions. If Chairwoman Janet Yellen and her Crew wanted a strong jobs report to give them cover to hike rates in September, they did not get it. But the number of jobs added in August was well below the nearly 275,000 average for June and July and in this political world, that means it was disappointing. The reality is these data are volatile and given the outsized increases early in the Summer, some give back was expected.

US Job losses in manufacturing were greater than forecast.

And the sharp rise in local government hiring was strange because it was not all in education. Schools are opening earlier, messing up the seasonal adjustments. But there was also a sharp rise in non-education local government workers, which may be signaling a come back in the financial position of this sector.

The unemployment rate was stable as was the labor force participation rate. But hours worked were down and wages rose modestly, so there still is some slack in the market.

The trade deficit narrowed much more sharply than expected. There was a huge increase in exports but a decline in imports.

Given the pace of the US economy, weakness of the world economy and the relatively strong USD, that pattern was also a surprise.

Food exports led the way with Soybean being the prime mover, China is the buyer.

US sold more industrial supplies and vehicles, but demand for our capital goods was down. On the import side, food and industrial supplies demand rose but consumer goods, vehicles and capital goods imports were off.

It is possible that trade could add to Q-3 growth. If that happens, a 3.5% rate is not out of the question but not likely, more like 2.2%.

The Key number Friday was payrolls, which was not strong enough to give the Fed the ability to raise rates in September.

Just now, it does not look like the next move will be before December, if then.

With a rate hike likely out for September, investors breathe a bit easier.

Friday, the major US stock market indexes finished at: DJIA+72.66 at 18491.96, NAS Comp +22.69 at 5249.90, S&P 500 +9.12 at 2179.97

Volume: Trade was light with 786-M/shares exchanged on the NYSE

  • Russell 2000: +10.0% YTD
  • S&P 500: +6.7% YTD
  • DJIA: +6.1% YTD
  • NAS Comp: +4.8% YTD
HeffX-LTN Analysis for DIA: Overall Short Intermediate Long
Bullish (0.35) Neutral (-0.11) Very Bullish (0.56) Very Bullish (0.58)
HeffX-LTN Analysis for SPY: Overall Short Intermediate Long
Bullish (0.30) Neutral (0.24) Bullish (0.44) Neutral (0.21)
HeffX-LTN Analysis for QQQ: Overall Short Intermediate Long
Bullish (0.36) Neutral (0.14) Very Bullish (0.60) Bullish (0.33)
HeffX-LTN Analysis for VXX: Overall Short Intermediate Long
Bearish (-0.47) Neutral (-0.23) Bearish (-0.43) Very Bearish (-0.75)

Have a terrific Labor Day Weekend

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