This is why investors are rejecting the report of the lousy jobs

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Shares remained unchanged on Friday and remained close to all-time highs. The S&P 500 was flat while the Nasdaq rose slightly. Both maintained gains during the week. The Dow fell about 75 points, 0.2%, and fell modestly in the last five days. (The US stock market will close on Monday for Labor Day).

Investors may be concerned that the unemployment rate fell to 5.2%, despite the slowdown in new jobs. This is a sign that the recovery of the labor market continues on a good path after the shutdown of the economy fueled by Covid and the brief recession of last year.

“The job market continues to recover and heal,” said Ashok Bhatia, Neuberger Berman’s deputy director of fixed income investments.

But Bhatia said the recent softness of labor, especially for sectors such as retailers and restaurants that have suffered concerns about Delta variants, could lead the Federal Reserve to move even slower in plans to eliminate some of the extraordinary stimuli that launched last spring.

Fed Chairman Jerome Powell recently suggested that the central bank will be cautious and will not move too aggressively to reduce or reduce its bond-buying program that has helped keep long-term interest rates low.

“We still hope that the slowdown will not start until 2022 and that there will be no tariff hikes until 2023 or possibly even later,” Bhatia said.

Welcome to September, historically the worst month for stocks

Other experts quickly realized that a weak report is not a trend, mostly because it was August data, a month that is notoriously noisy because people take vacations in late summer.

The government reported that, for example, zero jobs were added or lost in August 2011. This figure was subsequently revised.

“August is often a crazy month for jobs and it’s a crazier time than usual,” said Chadd Garcia, vice president and portfolio manager at Ave Maria Funds.

Garcia believes that much of the labor weakness in consumer-oriented industries could be temporary. Retail workers and other leisure professionals may be more inclined to return to work as increased unemployment benefits fade and children return to school.

Wage growth was much stronger than expected in August. Companies like Walmart (WMT) i CVS (CVS) they have recently announced hourly wage increases also for employees.
Mood on Wall Street has improved very quickly

But there are many, most notably the Fed’s Powell, who argue that higher wages will not cause a significant, permanent rise in inflation that would lead the Fed to slow the recovery.

Ed Keon, QMA’s chief investment strategist, agrees. He added that investors should also remember that Covid-19 has also caused supply disruptions that also distort the labor market, consumer prices and the economy in general.

“Obviously, that’s related to Delta,” Keon said. “There is a lot of frustration about supply chains and the search for labor. The big jump in wages last month may be due simply to the lack of growth in jobs with lower services.”

In other words, Friday’s job figures may be one more sign that Powell and others who believe inflation is transitory are right. This will probably reassure investors as well.

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