Jobs Report
The labor market is doing very well. Nonfarm payrolls rose 162,000 in August, a surprise after last month's initial minus 23,000. The unemployment rate held at 4.1%, even though the labor force participation rate ticked up from 61.4% to 61.6%. More people entered the workforce, yet the jobless rate stayed flat.
Revisions were large. July was revised up 44,000, from minus 23,000 to plus 21,000. June was revised up 11,000. Together that adds 55,000 more jobs.
Wage data stayed calm. Average hourly earnings rose 0.3%, in line with forecasts. Year over year, earnings came in at 3.1%, a tenth lower than last month but a tenth above the roughly 3% consensus.
Where The Jobs Came From
Private payrolls added 127,000. Details by sector:
- Food service and drinking places: plus 59,000
- Construction: plus 22,000
- Manufacturing: plus 16,000
- Health care: plus 13,000
- Information employment: minus 23,000
Last month, local government education lost 50,000 jobs, which is what pushed the July number negative. This time it added back 42,000, so that swing basically reversed itself.
The underemployment rate fell to 7.7%, the lowest since January 2025.
This was a strong jobs number that did not spark inflation fears, helped by the slight drop in year over year wage growth.
Market Reaction and the Fed
The downside: yields moved back up close to 4.8%, around 4.79%, which is weighing slightly on stocks. A strong economy raises the fear of higher rates, but inflation stays modest and is actually easing year over year.
Other data fits the same picture. The ISM services and manufacturing readings show the economy still in expansion, but at a slower pace. The Fed has to digest all of this. The next inflation tests come next week: PPI on Thursday, CPI on Friday, both ahead of the Fed meeting. Whether the market keeps trading on this jobs number into the holiday weekend is an open question.
Oil and Diesel
Crude oil traded just around $90 and was down about 1.25% to start the day. It ended last week near $82, still up about 10% over the past trading week, which is a problem. There has been no real deescalation, though there are whispers of talks, which may be why crude is off its highs.
Diesel hit an all-time high of $5.85, passing the prior peak from June 22. This is tied to events with Iran and crude oil in general.
Oil above $90 through the week pressured cruise lines, airlines, truckers, and shippers, hitting transportation and leisure names and, in the end, the economy. The key question: how long can the economy hold up under $90 oil, and could it survive $100 oil, whether for a short or long stretch?
