Jobs report
We knew the delta variant was going to create some chaos in the labor market for the month of September, but economists were still expecting us to create about 500k jobs during the month. In a super unfortunate turn of events, we only created 194k new jobs in September. A big part of this was driven by government jobs declining 123k, which means private sector jobs increased by 317k. That isn’t horrible but also not a great look. The leisure and hospitality industry, which has been leading job gains through most the year was at the top of the leaderboard again, creating 74k new jobs for the month. Even though we didn’t make moves on creating jobs, we are seeing meaningful wage inflation as wages increased 4.6% compared to last year. This is particularly interesting in the context of the low-wage leisure and hospitality jobs coming back the most.
Moral of the story: Going into September, the consensus view was that as soon as the elevated unemployment benefits ran out and kids went back to school, all these people would come flooding back to work. In reality, all those people have saved up extra cash from those unemployment checks over the last 18 months and will be able to make it without going back to work for a month or two, which means they’re going to return to work gradually over the next few months. The market didn’t really know whether to react positively to this jobs report (because it might mean the Fed continues to maintain its easy monetary policy) or negatively (because that’s obvious, where are the jobs?) and stock pretty much ended flat on the trading day. This is the second bummer of a jobs report in a row, let’s see if the October report points to a worrisome trend…
ISM services
The ISM Services Index came in at 61.9% for September, up slightly from its 61.7% reading in August. Any number above 50% indicates a growth environment across the services industries, and this was the 16th straight month of growth across these sectors. The demand is there across the board, the supply unfortunately is not. Labor shortages are becoming acutely impactful, vaccine mandates are causing some disruption, and rising energy prices are impacting transportation schedules as supply chains continue to be in complete disarray.
Moral of the story: More inflation is coming. There’s apparently an acute shortage labor in the Italian wine industry, can’t wait to start paying $30 for a bottle of Chianti that used to cost $10 a year ago…
Debt ceiling
The US was coming up against its debt ceiling (aka this arbitrary cap on our federal government’s borrowing limit) and in classic fashion, it came down to the last minute to figure out a solution. Washington’s ability to reach some sort of agreement on this issue has been an overhang on the stock market for the last week because if no agreement was reached, the US would have basically defaulted on loans, which would have been pretty catastrophic. There’s been a pretty aggressive pissing contest across party lines in Congress but lawmakers were able to set their issues aside to at least pass a temporary fix.
Moral of the story: Despite the Democratic party having the majority in both houses and running the White House, it’s been really interesting to see how the increasing divide between the far left and moderates within the party is impacting the party’s ability to actually get anything done. Stocks reacted positively to this issue being resolved in time, but the temporary nature of the solution just means we’ll be right back here at the beginning of December.