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Market Brief – Friday 9/6/19

The August Nonfarm payroll report was a dud with +130k jobs created against expectations for a +160k print. Adding to the problems with the report, the two prior months were revised lower by -20k jobs, the BLS estimated +93k fictitious jobs in this report, and the Federal government hired +25k workers for the 2020 census which factored into the headline number.

When Nonfarm payroll reports have prior-month downward revisions, it is a sign of economic weakness associated with a slowing or contracting economy. Adjusting the August report for the BLS birth-death model, payrolls would have been a mere +93k and +68k when stripping out census hiring. Overall, it was a weak report that shows payrolls are likely to contract in the next couple of months.

The Household survey painted a different picture with a headline print of +590k jobs created, but those working part-time for economic reasons made up 397k of those jobs. Wage growth improved by +0.4% in August with non-supervisory workers seeing a +0.5% increase in wages for August. The workweek increased by 0.1 hours, which made for a strong increase in overall wages for August.

Fed Chair Powell spoke in Switzerland this morning which will be his last public remarks before the FOMC’s September meeting. While Powell wouldn’t provide any hints of a potential rate cut, he stated the Fed doesn’t see a recession on the horizon and that the Fed will act appropriately to maintain the expansion. Members of the Fed never see a recession coming, even though the NY Fed recession model is flashing red of an impending recession. Stocks and Treasury yields rose following the talks.

Stocks barely moved above their overnight ramp and Treasury yields tagged overhead support where they found buyers. Gold fell as trade tension eased. Agricultural commodities saw another day of selling as investors celebrate warmer weather hitting the Midwest, even though the Midwest needs five-to-six weeks of warmer weather. Crude oil fought back against its early morning losses to close in the black.