032: Understanding the Monthly Jobs Report 08-04-23

Are you ready to truly understand the monthly jobs report and its impact on the equity market? By the end of this episode, you may have a whole new perspective. I'm Megan Horneman, Chief Investment Officer for Verdence Capital Advisors, and I'll be your guide as we navigate this seemingly 'just right' report. Today, we appreciate the decrease in the unemployment rate, celebrate the better-than-anticipated average hourly earnings, and cheer for the decline in the underemployment rate.

As we delve deeper, we reveal the slowest duo of job creation months since the end of 2020 and the beginning of 2021. We'll discuss the significance of the declining weekly work hours and the downward trend of temporary workers, and how these could mean a potential rise in unemployment. The market may be happy with this report for now, but we'll explore what it might imply for the Fed's decisions. So, join us for a revealing conversation, and don't forget to drop us a line with your queries or comments. 

Hello, welcome to Markets with Megan. I am Megan Horneman, the Chief Investment Officer for Verdence Capital Advisors. We're going to come to you today talking about the monthly jobs report that we got Today. The equity market is enjoying what we saw in the labor market report this morning. I'm going to break it down because the headline you'll probably see is that it was not too hot, not too cold. Meaning that from the good parts of this report were that the unemployment rate did dip a tenth lower now to 3.5% Earnings. If you look at average hourly earnings, they were slightly better than expected. And then, when you look at the underemployment rate this is an employment rate that looks at those people that are working part-time but would like to work full-time that actually dipped lower as well. So that's the good out of this. You're going to get a lot of the markets obviously liking this report today.

The unemployment rate is very low, but let's delve in a little bit deeper, like we like to do on this podcast, and look at some of the things that are starting to show further cracks in the labor market. It was the slowest two months of job creation that we've seen since December of 2020 and January of 2021. When you look at weekly hours, they ticked lower. Typically companies will cut the hours worked before they cut the employee. And then lastly, the temporary workers. This is something we've been watching closely because it historically has led to an eventual rise in the unemployment rate. Temporary workers have declined for six consecutive months and it's actually the worst 12-month rolling 12-month temporary workers we've seen since the pandemic. Again, that typically does lead on some uptake on unemployment rate.

So again, the market's liking it today because the Fed is likely going to stay on hold now in September. There's no rush for them to hike rates. But you're getting a little bit of that. Not too hot, not too cold. The Fed can stay on hold and the equity markets are enjoying that report today. If you have any questions or comments, please feel free to reach out to a podcast at verdence dot com. Thanks,