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By Alex
Eule | Friday, September 3 The
Taper Is Tempered. When the much-awaited
August jobs report dropped this morning, it looked awfully bleak. The
official numbers from the Bureau of
Labor Statistics showed that the economy added 235,000 jobs
in August, not bad for a typical month, but far from what economists were expecting
as the economy tries to snap back from the pandemic. The
experts were expecting a gain of 750,000 on the month. Instead,
August saw the smallest monthly gain in jobs since January. Stocks opened
down on the news, but they recovered some ground as investors dug into the
data. For one thing, a jobs miss could give the Federal
Reserve more room to maneuver as it considers when
to reverse course on financial stimulus like bond buying and zero-percent
interest rates. A pause in the recovery means investors can stop worrying
about that dreaded taper, at least for a while. "This
will certainly help keep the Fed on hold on their tapering plans, likely for
the rest of the year, and keep interest rates low which will likely cushion
any impact on the markets," said Brad
McMillan, chief investment
officer for Commonwealth Financial Network. But what if
the economy is truly cooling before it can complete its recovery. What if
Covid, because of the Delta variant, is once again dragging down
economic activity? In her jobs coverage today, Barron's Lisa
Beilfuss noted that Lydia
Boussour, economist at Oxford Economics, lowered her
third-quarter GDP forecast to 2.7% from 6.5% after the jobs
report. McMillan
offers a counter: Today's disappointing numbers stemmed from a temporary
supply problem, not a deeper demand-related issue. Looking at
the unemployment and underemployment numbers, which dropped, as well as the
labor force participation rate, it looks to have come from workers electing
not to enter the workforce. ... The takeaway
here is that much of the weakness comes from the rise in medical risks,
rather than a general slowdown in the economy which is also consistent with
the weak consumer confidence numbers. So who's
right? For now, investors have punted on the question. The S&P
500 finished basically flat on the day,
down just 0.03%. The Nasdaq
Composite, meanwhile, rose 0.2% to
another record. The tech-heavy index is full of growth names but throughout
the pandemic, it has often exhibited more
defensive qualities -- a place investors head when there's no good
reason to be anywhere else. One other
sign that Wall Street isn't particularly worried about the latest jobs
news: In terms of trading volume, it was the sixth quietest day of the year.
Even a tepid jobs report couldn't stir traders spending one last weekend at
the beach. With markets
closed Monday, we'll be taking the day off -- back in your inboxes on
Tuesday night. Have a happy and safe Labor Day weekend. Watch our TV
show on Fox Business Fridays at 10 p.m. or 11:30 p.m. ET; Saturdays at 10
a.m. or 11:30 a.m. ET; or Sundays at 7 a.m., 10 a.m., or 11:30 a.m. ET. This
week, we talk with Saira Malik,
Nuveen's chief investment officer of global equities, on her outlook for the
market and individual stocks. |
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