‘Chugging Along at a Slower Pace’: Traders on Employment Data

(Bloomberg) -- Stock futures slipped and bond yields ticked higher after a U.S. employment report that showed hiring was roughly as expected while worker pay rose slightly faster than anticipated.

Strategists and investors, shell-shocked after a week of market-moving pronouncements by Federal Reserve Chair Jerome Powell and President Donald Trump, were generally happy to have avoided an extreme outcome in the week’s last big report.

Here’s a sampling of Wall Street reaction:

• Megan Greene, former chief economist at Manulife Investment Management

“This is straight down the middle of what people expected. Every month I feel like we’re desperately trying to figure out what the implications of trade are from the jobs data and it’s not necessarily coming through as strongly as we expected. That trend continues.”

• Mike Loewengart, vice president of investment strategy at E*TRADE Financial Corp.

“If non-farm payrolls have been one thing this year, it’s inconsistent. Coupling this with the ADP numbers, though, jobs are still chugging along albeit at a slower pace than last year. If inflation is the alpha in the Fed’s decision making, jobs is the omega. And on the heels of Wednesday’s rate cut, a read like this could set a pretty cautious mood for the back half of the year and those closely watching the Fed’s every move. Given the relatively strong fundamentals we’ve been seeing, investors should remember to keep this morning’s read in context.”

• Dennis Debusschere, head of portfolio strategy at Evercore ISI

“I was asked about how payroll could be a positive for markets. Anything that weakens the USD, but doesn’t increase recession risk, that would likely come with in-line or lower payroll and muted wage growth. If the payroll is very weak, people will worry about recession, and if payrolls are very strong, USD could go up significantly at a time when global growth is weak. With revisions, a slightly weaker than expected report headline. Wages up slightly (good) and the unemployment rate was up for the right reason (participation increased). All things equal, this is a positive for risk assets as it points to little inflation risk.”

• Michael Antonelli, an institutional equity sales trader and managing director at Robert W. Baird & Co

“If you want to put a multiplier to this week’s events, the tariff has a 100 next to it, and the jobs report has a 2 next, to it. We were at 2943 for the S&P futures pre report, we’re at 2939 now. People would point to a wage component being a positive, but it’s only a very small beat, that would be what bulls on the economy would point to. But I don’t see it enough in this to change people’s perception on what’s going to happen in September. Average hourly earnings aren’t at a point where inflation is a real issue.”

• Larry Weiss, head of equity trading at Instinet LLC in New York.

“Headlines look in-line. Wage growth is always good. Perhaps increased earning power increases consumer spending, which leads us towards our inflation target,” he added. The data is ‘still implying an almost certain rate cut in September, however.”

• Ernie Cecilia, chief investment officer at Bryn Mawr Trust Co.

“The view is that perhaps it’s a little weaker, not terrible, but weaker than some market participants want to see. Let me put it this way, we wouldn’t think that this release should materially change the rhetoric or the outlook or the discussion in terms of economic growth or what the Fed may or may not do going forward. Those are the key issues. I don’t think it’s a game-changer in terms of central bank behavior or anything else. I think the bigger issue is the tariffs, the trade war side of it.”

• Randy Frederick, vice president of trading and derivatives at Charles Schwab

“Underemployment is the lowest since 2000, everything else is pretty much in line with expectations. Futures haven’t reacted very positively, because the new China tariff threat is overshadowing everything by far, and it will overshadow most economic data, especially now that it’s a brand new revelation that came yesterday.”

To contact the reporters on this story: Elena Popina in New York at epopina@bloomberg.net;Vildana Hajric in New York at vhajric1@bloomberg.net

To contact the editors responsible for this story: Jeremy Herron at jherron8@bloomberg.net, Chris Nagi

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