Telemus Weekly Market Review October 4th - October 8th, 2021
Jobs: Slow and Steady
On Friday October 8th, the Bureau of Labor Statistics released its employment report for the month of September. The results showed a surprisingly low 194,000 new jobs added during the month; well shy of 366,000 added in August. The unemployment rate fell to 4.8%, down from 5.2% the prior two months. While the unemployment rate continues to trend in the right direction, it remains higher than the pre-pandemic rate of 3.5%.
Following the release of the employment data, headlines grabbed on to the fact that the number of job gains were much lower than most expected. As with most economic reports these days, there are a number of puts and takes along with some elements skewed by unusual data. If you compare September’s employment data to August, the most apparent divergence was a decline of 123,000 government jobs. The Bureau of Labor Statistics largely attributed this to lower hiring among public schools. This happened last year as well but was more easily rationalized given that many schools started the year with remote learning modules.
Some progress was made among those that classify as being long-term unemployment. Long-term unemployed are those that have been without a job for over six months. In September, they accounted for 34% of total unemployed. A positive we noticed was an accelerating pace of job gains in September from this category.
The monthly jobs data is often scrubbed for clues on what the Fed might do given its dual mandate toward both unemployment and inflation. In our view, one of the biggest clues emerging from recent reports has been wage growth. This past month, average hourly wages grew 0.6% and are up 4.6% in the past year. With all of the debate around whether inflationary trends are transitory or sustainable, we view 4.6% average hourly wage growth to be the most damning evidence for an argument in favor of more persistent inflation. The power of wage growth is that it’s hard to cut hourly wages and higher paychecks often lead to more immediate adjustments in spending patterns.
As with most pieces of economic data these days, its hard to summarize what is transpiring behind the curtain in one line. Headlines indicated the September employment report to be disappointing. The disappointment seemed to be skewed by a single line item, public school hiring. The remainder of the report, however, depicted a steady trend. We believe this gives the Fed ample firepower to continue down its path of normalizing policy. Moreover, it provides some comfort that the economy remains in a steady progression.
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Matt joined the Telemus team in 2018. As Chief Investment Officer, he leads the firms the investment process and research effort. Matt has experience as an equity analyst and portfolio manager and has advised corporate pension plans on their manager selection. He’s been quoted in Money Magazine and Barron’s.