03 Sep JOBS DATA AT 8:30
August’s unemployment data is released today at 8:30. Will the release be of great significance? As widely noted, the Federal Reserve expects labor supply to increase in the immediate months as the enhanced unemployment benefits expire. This increased supply is expected to reduce rising wage inflation.
Analysts are expecting a 725k and 610k increase non-farm and private sector payrolls, a 5.2% unemployment rate, a 0.3% increase in average hourly earnings, a 34.8 hourly work week, and 61.8% labor participation rate (LPR). Considerable attention will be focused on the LPR and wages.
Yesterday according to the National Federation of Small Business a record share of small businesses had vacant positions in August and an unprecedented number boosted wage to lure workers.
The organization stated a record 41% of small business owners raised compensation and 50% had job opening they could not fill in August, up 1% from July and the largest share in monthly data back to 1986.
Moreover, a record 32% of small businesses said they intend to add payrolls in the next few months, while the number of planning to raise worker pay remained at a record high. Job skills remain problematic with 91% of those hiring or trying to hire indicate there are few or no qualified applicants.
Wow! How will this be reflected in today’s data.
It appears almost every day there is another warning about a selloff in the bond market and the possible ramifications of such. Yesterday legendary bond investor Bill Gross made cautionary comments. Gross, who formerly ran the world’s largest bond fund, stated yields on the 10-year Treasury are likely to climb to over 2.0% over the next 12 months.
Gross’s comments focused on the impact of Fed tapering and the insatiable demand for monies by the Federal government. He stated the Federal Reserve has been absorbing about 60% of net Treasury issuances through its QE program. The Fed is set to scale back asset purchases at a time when demand from central banks and investors has already been waning. Meanwhile fiscal deficits of at least $1.5 trillion going forward suggest Treasury supply will remain high.
Gross stated “how willing, therefore will private markets be to absorb this future 60% in mid-2022 and beyond? Perhaps if inflation comes to the 2%+ target by then a tantrum can be avoided, but how many more fiscal spending programs can we afford with paying for it with higher interest rates?”
Commenting in yesterday’s market action, Treasuries were flat but equites led by the cyclicals advanced, the inverse of market action of the last three months.
Last night the foreign markets were mixed. London was up 0.22%, Paris down 0.42% and Frankfurt up 0.12%. China was down 0.43%, Japan up 2.05% and Hang Seng down 0.72%.
The Dow should open flat but this could change significantly if the 830 data differs sharply form consensus. The 10-year is off 3/32 to yield 1.31%.