On Friday, September 6, the U. S. Bureau of Labor Statistics released the number of new jobs created during August. That much-anticipated and closely-watched number was 142,000, much higher than the June and July numbers of 118,000 and 89,000 respectively.
With such great economic news, why is it that Wall Street experienced the largest loss in quite some time? The answer may be that the news was far from good. There are three reasons why this is really bad news.
First, the 142,000 number fell 11% short of the 160,000 that was predicted and expected.
Second, that 142.000 number may not hold. The Bureau of Labor Statistics has a history of revising down the numbers initially reported. For example, the June number was revised from 179,000 to 118,000, and the July number was revised from 114,000 to 89,000. The combined number of jobs revised downward for those two months was 86,000. That is a two-month average downward adjustment of about 29%. If that trend continues, the final August number may end up being close to 100,000.
Third, even if the 142,000 number holds, the average number of jobs created during the last three years is dismal. As evidenced by the red line in the graph, that number has been decreasing steadily. This indicates, at best, a mediocre economy, at worst, the likelihood of a recession.
As a result of all this, the pressure has intensified for the Federal Reserve System and its chairman Jerome Powell to decrease interest rates by the expected 25 basis points when they meet later in September. In fact, many investors are requesting a larger, 50 basis points, decrease based on the notion that the economy will need that much of a boost.
It is likely that Powell will go for the 25-basis point reduction. After all, he has been teasing us with this for the last 12 months or so, and the jobs numbers report pretty much demands it. But it is not so likely that he will go for the 50-point reduction, because he has inflation to worry about. Biden/Harris claims notwithstanding, inflation has not been licked. At the AZ Daily Independent, we have been reporting on the inflation problem for some time. Three of those reports may be accessed by clicking HERE , HERE , and HERE.
The next meeting of the Federal Reserve’s Federal Open Markets Committee will be September 17-18, 2024.
