If not "Goldilocks," the August non-farm payrolls report released Friday should help Treasury yields go lower (nice short squeeze opportunity), which in turn, should push risk assets higher.
Here are the key takeaways we see from this jobs report:
Barely Any Jobs Created, but Jobs Nonetheless
The Establishment survey had 187k jobs, but that came with downward revisions of 110k, so a mediocre total of 77k jobs -- too few to make the Fed hawkish and enough that we don't have to price in recession risk -- yet.
The Unemployment Rate Went Higher for All the Right Reasons
The Household survey actually added 222k jobs, but unemployment went from 3.5% to 3.8% because the labor participation rate went to 62.8% from 62.6%. That is the highest since the pandemic and is the first time since the pandemic that we have higher labor participation rates than we did in much of 2018!
Maybe the impact of student loan payments restarting won't be a slowing economy, but more people seeking jobs? Ironically just as they become more difficult to find.
Average Earnings Dropped Back Down to a Manageable 0.2% for the Month
This despite headline after headline of the strong position labor is in during wage negotiations.
Average hours ticked up slightly, to 34.4, which is good in that it is ticking back up, but it is still well below what we saw in 2021 and early 2022.
I'm biased, as I'm currently long bonds and long risk, but I think Friday's number is perfect for that and think we could squeeze nicely into a new month.
If anything, the data are almost weak enough to spur recession fears, but I don't think there is enough in here for that.
The reality is the Fed must be jumping up and down with joy about the unemployment rate -- not just that it moved higher, but that it moved higher for all the right reasons.