Stocks aren’t expected to show major movement in today’s session given the almost empty economic docket, with Fed optimism following the Friday jobs report still dominating investor behavior.
The jobs report weakness was broad-based and reflected notable reversals from the recent trend line. Manufacturing failed to grow for the first time in the preceding 12 months, contrary to what the ISM survey has started showing lately. The jobs component of the August ISM survey showed hiring trends at their strongest level since mid-20111. Retail showed a drop in payrolls for the first time in six months, which runs counter to the service-sector ISM survey.
The Friday jobs report brought to an end the longest streak of 200-plus monthly payroll gains in in a decade. But plenty of constructive progress has been made in the labor market in the past year or so that can’t be undone by one soft report. The August disappointment notwithstanding, job gains have still averaged 226K a month over the last six months.
The key aspect of the jobs report that perked up the markets is the Fed angle – that the central bank will be cautious in starting its rate tightening cycle than would otherwise be the case following the August jobs disappointment. Recent strength in economic data had raised concerns that the Fed could start raising rates in March 2015 instead of the initial June or September 2015 timelines. The Fed certainly will be in no rush to start raising rates in the face of payroll data along the lines of what we saw on Friday. But as I stated in response to the jobs read on Friday, I don’t put much stock in the Friday report and expect it to get revised away in the next jobs report.
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