{"id":1632846,"date":"2022-09-05T06:18:00","date_gmt":"2022-09-05T10:18:00","guid":{"rendered":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/?p=1632846"},"modified":"2022-09-05T06:18:16","modified_gmt":"2022-09-05T10:18:16","slug":"jobs-report-signals-continued-rate-hikes-but","status":"publish","type":"post","link":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/jobs-report-signals-continued-rate-hikes-but\/","title":{"rendered":"Jobs Report Signals Continued Rate Hikes, But\u2026"},"content":{"rendered":"<aside class=\"mashsb-container mashsb-main mashsb-stretched\"><div class=\"mashsb-box\"><div class=\"mashsb-count mash-medium\" style=\"&quot;\"><div class=\"counts mashsbcount\">14<\/div><span class=\"mashsb-sharetext\">SHARES<\/span><\/div><div class=\"mashsb-buttons\"><a class=\"mashicon-facebook mash-medium mash-nomargin mashsb-noshadow\" href=\"https:\/\/www.facebook.com\/sharer.php?u=https%3A%2F%2Fwww.conservativenewsdaily.net%2Fbreaking-news%2Fjobs-report-signals-continued-rate-hikes-but%2F\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Facebook<\/span><\/a><a class=\"mashicon-twitter mash-medium mash-nomargin mashsb-noshadow\" href=\"https:\/\/twitter.com\/intent\/tweet?text=&amp;url=https:\/\/www.conservativenewsdaily.net\/breaking-news\/?p=1632846&amp;via=ConservNewsDly\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Twitter<\/span><\/a><a class=\"mashicon-subscribe mash-medium mash-nomargin mashsb-noshadow\" href=\"#\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Subscribe<\/span><\/a><div class=\"onoffswitch2 mash-medium mashsb-noshadow\" style=\"display:none\"><\/div><\/div>\n            <\/div>\n                <div style=\"clear:both\"><\/div><\/aside>\n            <!-- Share buttons by mashshare.net - Version: 4.0.47--><p><em>Commentary<\/em><\/p>\n<p><a href=\"https:\/\/www.bls.gov\/news.release\/empsit.nr0.htm\" target=\"_blank\" rel=\"noopener\">August jobs<\/a>\u00a0printed at 315,000 new <a href=\"https:\/\/www.theepochtimes.com\/t-jobs\">jobs<\/a>, somewhat above the consensus estimate of 300,000 jobs. It was more than 200,000 fewer jobs\u00a0 than were created in both July 2022 and August 2021. June and July revisions combined to create 107,000 fewer jobs than were previously reported. It is generally believed that 200,000\u2013250,000 jobs are required to accommodate population growth.<\/p>\n<p>The\u00a0<a href=\"https:\/\/www.theepochtimes.com\/t-unemployment\" target=\"_blank\" rel=\"noopener\">unemployment<\/a>\u00a0rate was 3.7 percent, up 0.2 percentage points from last month and down 1.5 percentage points from 5.2 percent last August. The\u00a0<a href=\"https:\/\/www.bls.gov\/news.release\/empsit.t01.htm\" target=\"_blank\" rel=\"noopener\">labor force participation<\/a>\u00a0rate was 62.4 percent, up from the 61.7 percent that printed in August 2021, and up 30 basis points (bps) from July. (A basis point is\u00a0defined as 1\/100th of a percentage point.)<\/p>\n<figure id=\"attachment_4706699\" class=\"wp-caption aligncenter\"><a href=\"https:\/\/img.theepochtimes.com\/assets\/uploads\/2022\/09\/02\/Screenshot-58.png\"><figcaption class=\"wp-caption-text\"><noscript><img loading=\"lazy\" decoding=\"async\" class=\"wp-image-4706699 size-full\" src=\"https:\/\/img.theepochtimes.com\/assets\/uploads\/2022\/09\/02\/Screenshot-58.png\" alt=\"Epoch Times Photo\" width=\"943\" height=\"585\" \/><\/noscript><\/figcaption><\/a> August Jobs by Average Weekly Wages from BLS data. (The Stuyvesant Square Consultancy. All rights reserved.\u00a0\u00a9 2022)<\/figure>\n<p>We are largely at the <a href=\"https:\/\/fred.stlouisfed.org\/series\/PAYEMS\">same level of jobs<\/a> that we had prior to the pandemic, 152.5 million, but the\u00a0<a href=\"https:\/\/www.theepochtimes.com\/t-jobs-creation\" target=\"_blank\" rel=\"noopener\">jobs creation<\/a>\u00a0trajectory that would have occurred in that period is lost, likely permanently. The question now is whether, with a slowing <a href=\"https:\/\/www.theepochtimes.com\/t-economy\">economy<\/a> and a Federal Reserve (Fed) putting the brakes on low interest rates, the current trajectory can be maintained or whether the job creation will flatten or decline.<\/p>\n<p>The majority of jobs were, again, in lower-wage sectors, like leisure and hospitality, and sectors that are largely government supported, like education and health services. That said, professional and business services, a higher-wage sector, also showed strong jobs performance, at 68,000 jobs, with an average weekly wage of more than $1,400. Nevertheless, only two sectors showed job growth over last month: retail and financial services; the others declined considerably.<\/p>\n<p>Annualized average real wages, which we report on a quarterly basis, increased by just $108, or 0.2 percent. However, annualized real wages fell in a number of job categories. (See the details in our September jobs report a month from now.)<\/p>\n<h2>Other Data<\/h2>\n<p>The Fed\u2019s balance sheet is shrinking from the <a href=\"https:\/\/www.nytimes.com\/2021\/03\/16\/business\/economy\/fed-2020-financial-crisis-covid.html\">run-up<\/a> that started during the pandemic in February 2020, but too slowly, in our view. It is set to accelerate this month, up to $95 billion, with the Fed\u00a0<a href=\"https:\/\/www.bankrate.com\/banking\/federal-reserve\/how-shrinking-fed-balance-sheet-impacts-your-finances\/\" target=\"_blank\" rel=\"noopener\">allowing a \u201cburn-off\u201d<\/a>\u00a0(i.e., allowing to mature without repurchasing) of its portfolio of Treasury securities ($60 billion per month) and mortgage-backed securities ($35 billion per month). This is intended to create a \u201csoft landing,\u201d but we think that it will only exacerbate the current inversion of the yield curve that has troubled us for some time.<\/p>\n<p>While we\u2019re hoping the Fed\u2019s burn-off will contract the inverted yield curve, which seems to be happening, somewhat, toward the end of August (as seen in this chart), we would like to see the 10-year yield at a higher rate than the two-year.<\/p>\n<figure id=\"attachment_4705181\" class=\"wp-caption aligncenter\"><a href=\"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-content\/uploads\/2022\/09\/Screenshot-55.png\"><img loading=\"lazy\" decoding=\"async\" class=\"lazy wp-image-4705181\" src=\"https:\/\/www.theepochtimes.com\/assets\/themes\/eet\/images\/white.png\" data-src=\"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-content\/uploads\/2022\/09\/Screenshot-55.png\" alt=\"Epoch Times Photo\" width=\"640\" height=\"406\" \/><figcaption class=\"wp-caption-text\"><noscript><img loading=\"lazy\" decoding=\"async\" class=\"wp-image-4705181\" src=\"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-content\/uploads\/2022\/09\/Screenshot-55.png\" alt=\"Epoch Times Photo\" width=\"640\" height=\"406\" \/><\/noscript><\/figcaption><\/a> Inverted two-year and 10-year yield curve for August 2022. (The Stuyvesant Square Consultancy)<\/figure>\n<p>At this writing, the inversion on the two-year and 10-year Treasurys is 21 bps. We would like to see the Fed reduce its balance sheet much more rapidly, as we have desired\u00a0<a href=\"https:\/\/www.theepochtimes.com\/federal-reserve-use-care-to-rein-in-inflation_4144084.html\" target=\"_blank\" rel=\"noopener\">since last year<\/a>, but there are concerns about maintaining the market\u2019s liquidity at a time of raising interest rates.<\/p>\n<p>The Institute for Supply Management\u2019s print of the Manufacturers Purchasing Managers\u2019 Index, the\u00a0Manufacturing PMI,\u00a0registered growth in <a href=\"https:\/\/www.ismworld.org\/supply-management-news-and-reports\/reports\/ism-report-on-business\/pmi\/august\/\">August<\/a> at 52.8 percent, unchanged from July. The Institute\u2019s Services PMI<sup>\u00a0<\/sup>showed growth at 56.7 percent, up 1.4 percentage points from June.\u00a0A reading above 50 signals growth. (The August Services PMI is still outstanding.)<\/p>\n<p>The Job Openings and Labor Turnover Survey (<a href=\"https:\/\/www.bls.gov\/news.release\/jolts.a.htm\" target=\"_blank\" rel=\"noopener\">JOLTS<\/a>) showed that the number and rate of job openings grew to 11.239 million (+199,000) and 1.8 percent, respectively, in July, the latest available data.<\/p>\n<p>Second-quarter 2022 revised non-farm business labor productivity and costs, released on Sept. 1, fell 4.1 percent and 10.1 percent, respectively. As we noted in the\u00a0<a href=\"https:\/\/www.theepochtimes.com\/june-jobs-beats-estimates-recession-is-a-jump-ball_4582756.html\" target=\"_blank\" rel=\"noopener\">June jobs report<\/a>, first-quarter 2022 labor productivity dropped to the lowest level since 1947. As a consequence, unit labor costs for that quarter increased 12.6 percent, thus adding to our\u00a0<a href=\"https:\/\/www.theepochtimes.com\/t-inflation\">inflation<\/a>. While\u00a0<a href=\"https:\/\/www.bls.gov\/news.release\/prod2.nr0.htm\">second-quarter 2022 data<\/a>\u00a0showed improvement over first quarter 2022, increasing productivity should be a public policy priority as it will help trim inflation.<\/p>\n<p>Household\u00a0<a href=\"https:\/\/www.federalreserve.gov\/releases\/housedebt\/default.htm\" target=\"_blank\" rel=\"noopener\">debt service<\/a>\u00a0as a percentage of disposable personal income keeps rising, particularly consumer debt. As <a href=\"https:\/\/www.newyorkfed.org\/microeconomics\/hhdc\">reported<\/a> by the Federal Reserve Bank of New York, \u201cCredit card balances saw their largest year-over-year percentage increase in more than 20 years, while aggregate limits on cards marked their largest increase in over 10 years.\u201d This is to be expected in an inflationary\u00a0<a href=\"https:\/\/www.theepochtimes.com\/t-economy\" target=\"_blank\" rel=\"noopener\">economy<\/a>\u00a0when wages fail to keep pace with higher prices and workers turn to their credit cards and consumer loans to maintain their lifestyles.<\/p>\n<p>Total business inventories are ridiculously high, and the\u00a0<a href=\"https:\/\/fred.stlouisfed.org\/series\/BUSINV\" target=\"_blank\" rel=\"noopener\">highest on record<\/a>, a factor mentioned by many of the respondents in the ISM report.<\/p>\n<p><a href=\"https:\/\/www.census.gov\/construction\/nrc\/pdf\/newresconst.pdf\" target=\"_blank\" rel=\"noopener\">Housing\u00a0starts<\/a>\u00a0in July, released on Aug. 22, were\u00a0at\u00a0a\u00a0seasonally\u00a0adjusted\u00a0annual\u00a0rate\u00a0of\u00a01,674,000. This\u00a0is\u00a01.3\u00a0percent\u00a0below\u00a0the\u00a0revised\u00a0June\u00a0rate\u00a0of\u00a01,696,000,\u00a0but\u00a0is\u00a01.1\u00a0percent\u00a0above\u00a0the\u00a0July\u00a02021\u00a0rate\u00a0of\u00a01,655,000.<\/p>\n<p>The\u00a0<a href=\"https:\/\/www.investors.com\/news\/economy\/ibdtipp-poll-economic-optimism-index\/\" target=\"_blank\" rel=\"noopener\">IBD\/TIPP Index of Economic Optimism<\/a>\u00a0for August was largely unchanged, down just 1 percent, to 38.1. It has been largely flat since June. \u00a0(The index signals optimism at 50 or above.)<\/p>\n<h2>Commentary<\/h2>\n<p>The\u00a0<a href=\"https:\/\/www.atlantafed.org\/cqer\/research\/gdpnow?panel=3\" target=\"_blank\" rel=\"noopener\">Federal Reserve Bank of Atlanta is projecting third quarter 2022<\/a>\u00a0to print at about 2.6 percent growth. The projection is based on enhanced growth in personal consumption expenditures, <a href=\"https:\/\/apps.bea.gov\/iTable\/iTable.cfm?reqid=19&amp;step=2#reqid=19&amp;step=2&amp;isuri=1&amp;1921=survey\">principally<\/a> in food services and accommodations and nonprofit institutions serving households in second quarter 2022. As an aside, this is an interesting correlation, coming as it does with 20 percent of U.S. households saying they <a href=\"https:\/\/www.marketwatch.com\/story\/its-the-first-step-to-eviction-why-20-million-u-s-homes-are-struggling-to-pay-their-utility-bills-11661504690\">cannot afford<\/a> their\u00a0utility bills and even more are concerned about being able to<a href=\"https:\/\/www.cnn.com\/2022\/08\/15\/homes\/rising-rent-wages-housing\/index.html\"> pay their rent.<\/a>\u00a0One might speculate that the increase in food services are homeless\u00a0 people eating at restaurants with funds from nonprofits.<\/p>\n<p><a href=\"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-content\/uploads\/2022\/09\/atlanta-fed_changes-in-subcomponent-contributions-to-gdpnow-real-gdp-growth-forecasts.jpeg\"><img loading=\"lazy\" decoding=\"async\" class=\"lazy aligncenter wp-image-4707048 size-full\" src=\"https:\/\/www.theepochtimes.com\/assets\/themes\/eet\/images\/white.png\" data-src=\"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-content\/uploads\/2022\/09\/atlanta-fed_changes-in-subcomponent-contributions-to-gdpnow-real-gdp-growth-forecasts.jpeg\" alt=\"Epoch Times Photo\" width=\"650\" height=\"500\" \/><\/a><\/p>\n<p><noscript><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-4707048 size-full\" src=\"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-content\/uploads\/2022\/09\/atlanta-fed_changes-in-subcomponent-contributions-to-gdpnow-real-gdp-growth-forecasts.jpeg\" alt=\"Epoch Times Photo\" width=\"650\" height=\"500\" \/><\/noscript><\/p>\n<p>The two quarters of decline in the first and second quarters of 2022 printed at a technical recession, which will need to be confirmed by the\u00a0<a href=\"https:\/\/www.nber.org\/research\/business-cycle-dating\/business-cycle-dating-committee-announcements\" target=\"_blank\" rel=\"noopener\">National Bureau of Economic Research<\/a>\u00a0Business Cycle Dating Committee, likely after the second revision of the data on Sept. 29. However, we reiterate our thesis that much of the negative GDP (gross domestic product) in the first and second quarters of 2022 was attributable to an anomaly with imports and inventories, as we explained in more detail in our\u00a0<a href=\"https:\/\/www.theepochtimes.com\/gdp-prints-at-a-technical-recession_4626874.html\" target=\"_blank\" rel=\"noopener\">second-quarter 2022 GDP report<\/a>.<\/p>\n<p>Inflation continues to print at an unacceptable level. To the extent it slows down when it prints on Sept. 13, we think most of that would be attributable to the Fed\u2019s tightening and the slowdown of the economy.<\/p>\n<p>We continue to believe that real overnight rates will need to go to 3.5\u20135 percent, and stay there for at least three quarters, to thoroughly extinguish inflation and, more important, inflationary expectations. To accomplish that, we reiterate our call for the Fed to increase the limit of the Treasuries and mortgage-backed securities that it allows to \u201cburn off\u201d up to at least $125 billion at its next meeting this month to reduce the Fed\u2019s balance sheet more rapidly. Effectively, this would be <a href=\"https:\/\/www.investopedia.com\/what-is-yield-curve-control-4797189#:~:text=Yield%20curve%20control%20(YCC)%20involves,to%20hit%20that%20rate%20target.\">yield curve control<\/a> to reverse the inverted yield curve and return the economy to realistic terms. Otherwise, we see a long, drawn-out period of economic malaise as the Fed pursues a \u201csoft-landing.\u201d We believe the Fed should lean into a sharp, short recession to return the economy to pre-pandemic growth.<\/p>\n<p>The deceptively named, and recently signed, Inflation Reduction Act is troubling because the minimum tax provisions will likely offset investment decisions necessary for an increase in our now record-low productivity. As we explained at some length in our\u00a0<a href=\"https:\/\/www.theepochtimes.com\/april-jobs-headline-is-good-but-deeper-dive-disconcerting_4448278.html\" target=\"_blank\" rel=\"noopener\">April jobs report here<\/a>, prices are a function of the money supply and the quantity of goods (MV=PQ). As the Fed reduces the money supply (M) with quantitative tightening in monetary policy, Capitol Hill and the president have erred gravely with fiscal policy that discourages capital investment that will further reduces labor productivity and, thus, the quantity of goods and services (Q) in the economy. The new law operates at cross-purposes to Fed policy, creating a clash with the Democrats\u2019 stated intent to fight inflation.<\/p>\n<p>We believe third-quarter 2022 GDP will print in the neighborhood of to 2 percent. We are monitoring \u201cgray swans\u201d (i.e., events known and possible to happen, but assumed unlikely) in the Taiwan Straits, Ukraine, and Europe, and will post information on those in our Twitter feed, @Stuysquare.<\/p>\n<hr \/>\n<p><em>DISCLOSURE:\u00a0The views expressed, including the outcome of future events, are the opinions of The Stuyvesant Square Consultancy and its management only as of September 2, 2022, and will not be revised for events after this document is submitted to The Epoch Times editors for publication. Statements herein do not represent, and should not be considered to be,\u00a0<a href=\"https:\/\/www.theepochtimes.com\/t-investment-2\" target=\"_blank\" rel=\"noopener\">investment<\/a>\u00a0advice. You should not use this article for that purpose. This article includes forward looking statements as to future events that may or may not develop as the writer opines. Before making any investment decision you should consult your own investment, business, legal, tax, and financial advisers. We associate with principals of TechnoMetrica on survey work in some elements of our business.<\/em><\/p>\n<p><em>Note:\u00a0Our commentaries most often tend to be event-driven. They are mostly written from a public policy, economic, or political\/geopolitical perspective. Some are written from a management consulting perspective for companies that we believe to be under-performing and include strategies that we would recommend were the companies our clients.<\/em><\/p>\n<div class=\"author_wrapper\">\n<div class=\"one_author_block round\">\n<div class=\"top_row\">\n\t\t\t\t\t<a href=\"https:\/\/www.theepochtimes.com\/author-j-g-collins\"><img decoding=\"async\" src=\"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-content\/uploads\/2022\/09\/ttl7dayhcW_WEB_JGCollins.jpg\" alt=\"J.G. Collins\" \/><\/a><\/p>\n<p>Follow<\/p>\n<\/div>\n<p>J.G. Collins is managing director of the Stuyvesant Square Consultancy, a strategic advisory, market survey, and consulting firm in New York. His writings on economics, trade, politics, and public policy have appeared in Forbes, the New York Post, Crain\u2019s New York Business, The Hill, The American Conservative, and other publications.<\/p>\n<\/p><\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>CommentaryAugust jobs\u00a0printed at 315,000 new jobs, somewhat above the consensus estimate of 300,000 jobs. It was more than 200,000 fewer jobs\u00a0 than were created in both July 2022 and August<\/p>\n","protected":false},"author":1,"featured_media":1632848,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mo_disable_npp":"","fifu_image_url":"","fifu_image_alt":"","footnotes":""},"categories":[],"tags":[],"class_list":["post-1632846","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry"],"_links":{"self":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts\/1632846","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/comments?post=1632846"}],"version-history":[{"count":0,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts\/1632846\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/media\/1632848"}],"wp:attachment":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/media?parent=1632846"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/categories?post=1632846"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/tags?post=1632846"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}