US Stock Market Overview – Stocks Trade Mixed Following Soft Employment Report

US Stocks were mixed on Friday as sentiment eased into the close following the US payroll report. While employment is slowing and the headline number came in softer than expected, the 3-month trend of 150,000 jobs is the figure that will keep unemployment steady. Most sectors on Friday were higher led by consumer staples and healthcare, utilities bucked the trend. The dollar was steady, along with US yields. Energy shares moved higher this week, rising slightly more than 3%, as natural gas prices surged 9% and crude oil increased 2.7%.

Employment is Slowing but It’s Steady

One of the key takeaways from Friday’s employment report is while the consumer remains steady, employment is slowing. The current 3-month and 6-month averages both at around 150,000 now, down from about 230,000 a year ago.

On Friday the Bureau of Labor Statistics reported that payrolls added 130,000 new jobs in August, marking the smallest increase in three months. Expectations were for the number of jobs to increase by 170,000. The unemployment rate, which is a household survey remained unchanged at 3.7%. Hourly wages increased by 0.4% month over month and are now 3.2% year over year. Private payrolls rose 96,000, a three-month low, according to Labor Department figures Friday that trailed the median estimate of economists for a 150,000 gain.

The federal government hired 25,000 temporary workers in preparation for the 2020 Census in August, giving the overall jobs gain a big bump. Employment in federal government rose by 28,000 in total in August. The weakness largely came from the retail sector, which saw a net decline in workers of 11,100 in August alone. Trade, transportation and utilities also lost 11,000 jobs, and mining and logging lost 5,000 positions. The participation rate, or share of working-age people in the labor force, increased to 63.2%, while the employment-population ratio rose to a 10-year high of 60.9%, both up 0.2 percentage point from the prior month.

The Fed is On Deck is a Cut in the Cards?

Federal Reserve Chairman Jerome Powell said Friday that the FOMC’s pivot this year to lower interest rates has helped sustain US economic growth. Powell noted multiple challenges to that picture, specifically the drag from Europe and elsewhere. That’s compounded by the tariff battle between the US and China as well as a persistently low inflation rate that has run below the Fed’s 2% target. The market is currently pricing in a rate cut when the fed meets in September. There is approximately a 40% change of a 50-basis point cut and 95% chance of a 25-basis point cut.