- Steepest US jobs revisions since 2009
- Interest rate cut nailed on for September
- Jackson Hole speech likely to be dovish
The US BLS (Bureau of Labor Statistics) failed to post revisions to the monthly payroll figures at the allotted 10am New York time yesterday causing confusion among economists, many of whom had to call the department directly to get the number.
A spokesperson for the BLS said: ‘The integrity of our data releases is BLS’s top priority and we are closely reviewing our procedures to ensure this does not happen in the future.’
When the data finally arrived around half an hour later it showed payrolls will likely be revised down by 818,000 for the 12-months to the end of March, the biggest markdown since 2009.
The revision, which is provisional, is equivalent to around a 30% reduction in the number of jobs created compared with prior estimates. It suggests average monthly job growth of around 174,000 rather than the 240,000 previously thought.
SEPTEMBER RATE CUT NAILED ON
Stocks and bonds initially jumped, sending yields lower, as investors interpreted the weaker job market data as supportive of Fed rate cuts. The benchmark S&P 500 index finished the session up around four tenths of one percent and 10-year bond yields dropped as low as 3.6% before closing around 3.8%.
According to the CME’s Fedwatch tool, investors are pricing in a two-thirds chance of a quarter percentage point cut at the next Fed meeting on 18 September.
The reading has fallen from close to 89% a month ago as investors increasingly speculate the Fed might opt for a larger half a percentage point cut with its odds increasing to a 33%, around 10 times higher than a month ago.
Fed minutes from the 31 July meeting were also released yesterday which showed most Fed members thought it appropriate to begin cutting rates at the September meeting.
Several officials even said they would have supported a rate cut at the July meeting, suggesting the Fed might have left it too late to begin cutting rates given their known lagged effects on the economy.
All of which puts greater importance on Fed chair Jerome Powell’s Jackson Hole speech tomorrow (23 August) which is due around 3pm UK time.
In a research note on Monday (19 Aug), economists at Bank of America argued Powell will strike a dovish tone as the Fed shifts its focus to preventing undesired weakness in the labour market.
