The August payroll release this morning showed a gain of 142k jobs for the month while the unemployment rate moved slightly lower to 4.2%. Underneath the surface there were some good data points and some bad data points, although on the whole we would characterize the data as softer. Hiring has definitely slowed but layoffs have also remained very low; higher unemployment over the last few months was driven by new entrants in the workforce rather than job losers. Manufacturing and retail shed jobs in the month, but residential construction jobs moved to a new cycle high after stronger job gains in August. All in all, softer, yes, but consistent with our outlook of a soft landing.
As for the Federal Reserve and their September meeting, market-based probabilities have moved in favor of a 0.5% cut over a 0.25% cut although very much a coin flip. The headline number for August job gains wasn’t soft enough to definitively make the case for 0.5% but, in lieu of revisions lower for prior months gains, the Fed may continue to be viewed as ‘behind the curve’ with a 0.25% cut.
Source: CME Fed Watch Tool, as of 9/6/2024
In our view, the Fed has two clear choices. They either cut by 0.25%, and aggressively hammer the point that they are willing to do much, much more if needed (a very dovish small cut), or, they cut by 0.5% and continue to emphasis a data dependent framework (a slightly hawkish big cut). Outside of this they have the potential to spook the market with a policy mistake that is either too hawkish or too dovish. Get your popcorn ready!
Sean Dillon, CMT, CFTe
SVP, Investment Strategy
CW Advisors, LLC (“CWA”) is a registered investment advisor with the U.S. Securities and Exchange Commission (“SEC”). Registration does not imply a certain level of skill or training. For additional information, please visit our website at cwadvisorsgroup.com or visit the Investment Adviser Public Disclosure website at www.adviserinfo.sec.gov by searching with CWA’s CRD #310873.
This note is provided for informational purposes only. CWA believes this information to be accurate and reliable but does not warrant it as to completeness or accuracy. This note may include candid statements, opinions and/or forecasts, including those regarding investment strategies and economic and market conditions; however, there is no guarantee that such statements, opinions and/or forecasts will prove to be correct. All such expressions of opinions or forecasts are subject to change without notice. Any projections, targets or estimates are forward looking statements and are based on CWA’s research, analysis, and assumption. Due to rapidly changing market conditions and the complexity of investment decisions, supplemental information and other sources may be required to make informed investment decisions based on your individual investment objectives and suitability specifications. This note is not a complete analysis of all material facts respecting any issuer, industry or security or of your investment objectives, parameters, needs or financial situation, and therefore is not a sufficient basis alone on which to base an investment decision. Clients should seek financial advice regarding the appropriateness of investing in any security or investment strategy discussed or recommended in this note. No portion of this note is to be construed as a solicitation to buy or sell a security or the provision of personalized investment, tax or legal advice. Investing entails the risk of loss of principal.
Comments are closed.