Shock from the US employment report of August, released today: the disappointment is great, not to say huge. The data released by the United States Department of Labor showed that, in August, the US economy has created just 235,000 new jobs, much worse than estimates.
The economists Dow Jones interviewed had predicted a creation equal to practically triple, or 720,000 new payslips.
The US unemployment rate fell from 5.4% to 5.2%, in line with expectations.
New job creation was the lowest since January 2021 and followed the boom in July of +1,053 million in paychecks (figure revised upwards from the rise of 943,000 new employees initially disclosed.
Bloomberg analysts commented on the report:
“The deceleration in hiring probably reflects both growing fears for the rapid spread of the Delta variant of Covid-19, and the difficulties (of companies) in recruiting the profiles they need “.
Among other items, participation in the workforce, which remained practically flat, at 61.7%, disappointing the 61.8% expected by the consensus.
Also pay attention to wages, who picked up the pace, up by 4.3% on an annual basis and 0.6% on a monthly basis, well beyond expectations, equal to + 4% and + 0.3% respectively.
Confirmation of the rise in inflation and weakness in employment seems to sound the alarm bell for stagflazione, that is, the situation in which GDP growth remains anemic in the face of an escalation of prices. Of course, we cannot speak at all of anemic GDP growth in the US: this does not, however, prevent some pessimistic economists from questioning the sustainability of the recovery.
That said, the occupation isn’t that bad overall when you consider it the upward revision of the jobs created in July, which exceeded the one million mark, which was also joined by the upgrade of the June issue, with payrolls revised up to +962,000 units, compared to 938,000 units disclosed two months ago.
But another fact is that employment remains well below the levels before the outbreak of the Covid pandemic in general, as the overall workforce is less than that time period by 2.9 million. unit.
The data proposes again the Fed’s tapering dilemma. Dovish indications emerged from the highly anticipated speech delivered by Federal Reserve Chairman Jerome Powell at the Jackson Hole symposium.
Markets post US data: Wall Street down but not that much, euro blaze over $ 1.19
With the publication of the employment report, some economists now question that the tapering can be announced according to Powell’s wishes, or by the end of the year.
However, the expectations of a dovish Fed are not enough to reassure investors, with Wall Street traveling lower after the figure, even if not that much, precisely because of the QE assistance which is expected to last a long time; the euro went up to $ 1.1906, up by 0.60%, extending the increases already collected in recent days pending an announcement of the tapering also by the ECB; the rise in inflation measured by wages is at the same time priced by US Treasuries, with the ten-year rates which rise to 1.329% and the thirty-year rates which rise to 1.95%.
“Today’s report reflects a strong turnaround in employment growth, likely due to the impact of the Delta variant on the US economy, although August is a month also notoriously difficult to accurately track due to summer holidaysNoted Tony Bedikian, head of global markets at Citizens.
And from ING came the comment of James Knightley, chief international economist, who recalled what emerged from the US National Federation of Independent Companies, or from the (NFIB):
“The data showed that companies want to hire, but that there are simply no workers available: this is why wages rise. Consequently, in the event that Covid cases should drop in the coming weeks and, another important factor, the increase of the job offer, we could see a significant acceleration of job creation ”.
In all this, the economist of ING highlighted that, “regarding the tapering of the Fed, President Powell remains more cautious than many of his colleagues, due to the reappearance of the Covid that brings him, as he said speaking at the symposium of Jackon Hole, to stand at attention towards “Those maneuvers that can be launched at the wrong times”.
Among Powell’s other key phrases – we read in the ING report – the one that states that “There is still a long way to go to reach full employment” before the Fed can say that the condition of “significant further progress” has been met. “
Knightley pointed out that “US employment remains below 5.33 million from the peak reached in February 2020: as a result, this factor will most likely weigh down the enthusiasm of several Fed district presidents about an announcement (of the tapering) which was given in September “.
ING believes today’s report supports the outlook of “an announcement that comes rather in November, with the beginning of the reduction in asset purchases (which is currently taking place for $ 120 billion per month) which could start in December ”.