Powell Can Stick to His First Draft: Traders Assess Jobs Report
Jerome Powell in Washington, D.C., U.S. (Photographer: Andrew Harrer/Bloomberg)

Powell Can Stick to His First Draft: Traders Assess Jobs Report

(Bloomberg) --

News the U.S. employment picture was decent if less robust than hoped in August kept equity futures elevated as traders saw the report as cementing more stimulus.

The economy added 130,000 jobs, trailing the average estimate, while the unemployment rate held at 3.7% and hourly earnings were higher than forecast. It came out four hours before Federal Reserve Chairman Jerome Powell speaks on monetary policy in Zurich. Here’s how strategists and traders reacted:

Powell Can Stick to His First Draft: Traders Assess Jobs Report
  • Dennis DeBusschere, head of portfolio strategy, Evercore ISI.

This is bullish -- keeps aggressive Fed (Powell is not rewriting his speech at 12:30 today on this number). Rates should be sideways and curve should steepen. It’s positive for equities as the report speaks to longer expansion. It’s positive for the same things that have worked (tech). Cyclicals fine on the day if risk assets move up, which they should. Given all the other consumer/employment readings have been strong, people will likely discount the headline miss -- especially given the huge jump in household employment.

  • Candice Bangsund, portfolio manager, Fiera Capital.

The headline number was a mixed bag -- something for both the hawks and the doves. What was encouraging is the jump in hourly earnings, particularly for inflation backdrop. We’re likely to see another insurance cut in September and it’s largely priced in. It may be a bit of a hawkish cut in that the Fed will signal in that it’s not the beginning of a easing cycle and going forward they’ll be in a wait and see mode. The numbers in the U.S. We’ve been seeing isn’t consistent with a) the recession and b) four rate cuts the market is pricing it.

  • Bruce Bittles, chief investment strategist, Robert W. Baird.

The print almost guarantees that the Fed is going to cut rates by 25 points. Yesterday’s ADP was higher than expected and if today’s jobs numbers were higher, there could be a lot of questions about whether the Fed was going to cut rates this month. The print doesn’t change anything, it solidifies the fact that the Fed is going to lower rates. Powell speaks later today. The Fed has pretty well signaled its stance on interest rates, Powell may confirm that today or make a little stronger statement.

  • Tony Bedikian, head of global markets, Citizens Bank.

Today’s jobs report shows the resiliency of the United States economy despite several global headwinds. The on-again, off-again U.S.-China trade talks continue to roil markets and, in some ways, are mirroring the on-again, off-again Brexit debate. Both issues are providing market participants with more theater than substance while the U.S. consumer tunes them out, keeps spending and keeps the U.S. economic fundamentals on track.

  • JJ Kinahan, chief market strategist, TD Ameritrade.

We’re light on the number. August is always a strange report anyway. The reason I say that is because you have some of the summer jobs that are sort of rolling off as kids go back to school or the resorts or whatever that may be open in the summer that aren’t the rest of the year. You also have the anomaly of the government hiring 25,000 workers for the census. You normally don’t see that.

  • Ilya Feygin, senior strategist, WallachBeth Capital LLC.

The weak payrolls and higher hourly earnings are slightly negative for equities because they force us to deal with a slightly weaker economy but do not change the central bank rate path at all in our view. We would expect an eventual downtick in S&P futures to the 2,970 area where they found support last night and then the 2,950/2,954 area.

  • Marvin Loh, global macro strategist, State Street.

It certainly shows that the jobs market ultimately is slowing but it isn’t rapidly compressing yet at this point. Past mid-cycle, more towards late-cycle but it definitely doesn’t seem that it’s a late, late cycle yet. This one’s got a little bit in it for everybody.

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