August Employment Report Should Stop the Fed in September

The August Employment Report should stop the Fed from hiking at its September FOMC Meeting.  The Report joins yesterday's Mfg ISM in showing that the economic strength seen in June and July -- and cited by the Fed hawks for their desire to hike in September -- was temporary.  (I believe the June-July strength was just a catch-up after the weak May.)  

The Report suggests modest economic growth.   And, I would not be surprised if the Atlanta and NY Fed models eventually lower their nowcasts of Q3 Real GDP Growth (currently 3.2% and 2.8%, respectively).  But, the combination of modest growth, low inflation, and steady Fed policy should be positives for stocks and Treasuries.  

Note that my August Payroll estimate of +150k was almost dead-on.  It ranked 2 out of 150 estimates on Estimize.com.

Here are the salient points of the report:

1.  The 151k m/m increase in Nonfarm Payrolls is below the +186k m/m average from January through July.

2.  The cyclical sectors -- manufacturing and construction -- posted job declines.

3.  While the Unemployment Rate was steady at 4.9%, it rose to to 4.92% from 4.88% unrounded.

4.  The broader measure of Unemployment -- U6 -- was steady at 9.7%.

5.  Part-timers for Economic Reasons rose for the 2nd month in a row.

6.  The Nonfarm Workweek fell to 34.3 Hours from a downward-revised 34.4 Hours in July (was 34.5 Hours), arguing against a pickup in production.

       a.  August Manufacturing Output is likely to unwind the July jump.  Fed hawks had cited the July jump in arguing that economic growth was picking up.

7.  Average Hourly Earnings rose 0.1% m/m, pushing down the y/y to 2.4% from an upward-revised 2.7% in July.  The August y/y increase is the lowest since November 2015.