On the August Jobs Report

A disappointing jobs report, on top of downward revisions, and we can’t blame Hurricane Harvey. It’s out of synch with upside surprises in ADP payrolls and ISM employment indices this week, but on only the first day of the new month we lack the other labor market indicators for a full reality-check. Another dull month for wage gains – on top of yesterday’s reported drop in PCE inflation and uncertainties arising from Harvey – absolutely lock in no rate hike at the September FOMC, and probably defers onset of normalization of the balance sheet for a December announcement. It’s also ideal optics for setting up the fight to raise the debt ceiling and cut taxes – not an embarrassment to the Trump administration, but an argument for caution and stimulus. We reiterate our contrarian view that tax cuts will be enacted this year.