Whatâs Going On Here?Data out on Friday showed the US added just 235,000 new jobs last month â far fewer than even economistsâ lowest forecast of 400,000 (tweet this). So, uh, is it time to panic? What Does This Mean?Before you start running around the room in a frenzy, there are two mitigating factors to bear in mind here. First, the survey was taken in mid-August, when Delta variant fears were arguably at their highest. Bosses mightâve put hiring on pause to manage a slowdown in demand, and potential employees mightâve been holding off on accepting jobs to keep themselves safe. Second, wage growth came in ahead of expectations, though that was admittedly because high-paying jobs â rather than those in the retail and hospitality and leisure sectors, where hiring stayed flat or declined â were being filled. Between those two factors, most economists actually reckon Augustâs jobs report was just a coronavirus-driven blip. Why Should I Care?For markets: Keep the support cominâ.
The US Federal Reserve (the Fed) has previously said that Augustâs jobs data would influence its gameplan for reducing its economic support, namely its bond-buying. But given how far short the numberâs come in, the central bank isnât expected to announce any major changes this month. Instead, itâll probably wait until November at the earliest to see if August was a one-off. And since a reduction in the amount of bonds the Fed buys could drive stock prices lower (all else equal), the stay of execution should benefit stock prices in the short term.
The bigger picture: Central banks are in sync.
Economists are on average expecting the European Central Bank to start rolling back its economic support later this year too, with Europe having got a stronger handle on the pandemic than the US. That could put it on a similar timeline to the Fed, and show that major central banks are as synchronized in their pandemic recoveries as they were in their collapses. | 