The European Central Bank was in the spotlight this week, but
the focus today is on the U.S. labor market, following a
surprisingly weak monthly jobs report this morning.
With respect to the conduct of monetary policy, the market was
expecting some sort of easing action coming out of next week's FOMC
meeting. Minutes of the last FOMC meeting and Bernanke's Jackson
Hole speech helped strengthen those expectations. Today's jobs
report will further strengthen those expectations. This is a weak
report, proving once again that recent optimism on the labor market
front may have been premature. The report brings back the QE debate
to the front burner.
The Bureau of Labor Statistics (BLS) reported July non-farm
payroll gains of 96K, below the roughly 125K expected and the 141K
jobs in July (revised down from 163K originally reported). The
revisions trend was clearly negative - with July and June both
revised lower. The unemployment rate ticked down to 8.1% from 8.3%
last month, driven primarily by a drop in the labor force
participation rate to its lowest level since the early 1980's.
Thursday's ADP report of strong private sector job gains appears
to have been off the mark this month after accurately providing a
preview of the BLS number in July. A total of 103K private sector
jobs were created in August, compared to 162K in July, with the
government sector suffering job losses of 7K. The ADP report showed
private-sector job gains of 201K in August.
Manufacturing lost 15K jobs in August, compared to gains of 23K
in July, while service sector jobs totaled 119K, compared to job
gains of 139K in July and 54K in June. The manufacturing decline is
particularly worrying as the factory sector was consistently adding
jobs in this recovery, but seems to have lost steam lately as
confirmed by the sub-50 readings on the ISM survey in the last two
months. Temp jobs dropped 4.9K, after steady gains in recent month.
The average workweek remained unchanged at 34.4 hours, while
average hourly earnings dropped by a penny to $23.52. The August
average hourly earnings are up 1.7% from the same period last
year.
In corporate news, the technology space has become very active
in recent days with companies coming out with new products and
services. In this holiday shortened week alone, we have seen new
devices from
Nokia
(
NOK
),
Google's
(
GOOG
) Motorola unit, and
Amazon
(
AMZN
). The big launch is from
Apple
(
AAPL
), which is expected to come out with the latest iPhone offering in
the coming days, and a slew of products that will work on
Microsoft's
(
MSFT
) new operating system. Apple is also reportedly working on
introducing a music streaming service along the lines of
Pandora's
(
P
) offerings.
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