On the August Jobs Report

A big miss in net payrolls, with virtually no net revisions to the last two inexplicably strong months. This was not the “solid performance” that Yellen says she is looking for. Growth in hourly wages was only 0.1%, and aggregate wages contracted by 0.1%. On a “payroll basis,” the household survey showed a loss of 128,000 jobs. Yet market-implied expectations for a rate hike at the September FOMC, after a big initial dip, have recovered to nearly unchanged at a 32% probability. Objectively there is no way to argue that there isn’t a great deal of slack in the labor market, but the Fed’s continued exaggerations about its strength keep rate hike fears alive in the markets. We continue to say no hike in September.