On the August Jobs Report

A big miss, offset somewhat by large upward revisions to prior blockbuster months. 225,000 payrolls is consistent with our model based on contemporaneous labor market indicators. We think this tepid jobs growth is connected to the slight reversal of remobilization seen in our Social Distancing Index, associated with a new Covid case-wave and fears of the Delta variant. If the US follows the global pattern, the case wave will soon reverse itself, and public obsession with Delta has already begun to abate. Strong growth of the labor force is likely associated with the maturation of the roll-off of enhanced unemployment benefits in half the US states. Following two blockbusters, this tepid jobs report likely moves the Fed’s announcement of taper back to the December FOMC; there will be only one more jobs report before the November meeting. Powell, seeking “broad and inclusive” employment (and reappointment) will be especially disappointed by the sharp rise in the African American unemployment rate.