Nonfarm Payrolls August 2017

The headline number for August nonfarm payrolls came in at 156,000, approximately 24,000 below consensus estimates. The unemployment rate ticked up 0.1% to 4.4%, while the labor participation rate held at 62.9%. Revisions to the previous July and June BLS reports reduced reported jobs by 20,000 and 21,000 respectively. Hourly earnings also came in below expectations showing a year over year increase of 2.5%.

August has become known as one of the noisier reports in the calendar year, but that should not diminish the significance of any reading on the health of the US labor market. When the Bureau of Labor Statistics released its report this morning at 7:30 CDT, snap adjustments to expectations were reflected most acutely in currencies and rates. The US dollar sold off strongly on the news as rates dropped. However, movements in currencies and rates markets moderated going in the cash open at 8:30 CDT.

This jobs report in and of itself is not dismal; it simply serves as a reminder of the slow growth world in which we live. Across the pond at the European Central Bank, Mario Draghi suggested that plans for quantitative easing across the Eurozone might not be finalized until December. As European growth in 2017 has been stronger and more broadly based than in the US, it is not surprising that Draghi and his cohorts at the ECB are moving toward a more hawkish approach to monetary policy. Could this lead to a steepening of the yield curve? Time will tell. Until then, we maintain our current strategic posture as noted below, while having established a relatively bullish risk stance in a tactical sense.      

Market Outlook: Bearish USD, Neutral Rates, Bullish Equities