SEP 10, 2021
A big miss in jobs creation.
A pall of disappointment hung over the market like a shroud after the release of the soft jobs report last Friday. 235,000 jobs were created in August, far from the market’s expectation of 720,000 jobs. The rise in COVID cases throughout August has impacted the leisure and hospitality sector strongly, causing it to stall as no jobs were created in this sector. The leisure and hospitality sector used to be the main driver of jobs growth until now as the professional and business services sector led the jobs growth in August.
The negative impact on the jobs market is apparent as 5.6 million people reported not being able to work due to business closures caused by the pandemic. This figure is higher than the July’s figure of 5.2 million. Also, 1.5 million people were prevented from looking for a job due to the pandemic.
Data revision provides a trail of hope.
While the number of jobs created in August was disappointingly low, the corresponding figure for July and June were underestimated in the previous jobs report. As a result, the number of jobs added in July was revised upwards from 943,000 to 1,053,000 and in June, that figure was revised from 938,000 to 962,000. Hence, the upward revisions for both months totaled to 134,000 jobs. At the moment, the job market is around 5.43 million jobs below the pre-pandemic level.
Moreover, based on historical data, the accuracy of the jobs figure for August is subjected to substantial revision due to people going on summer vacations, resulting in discrepancies in data collection. Thus, the jobs figure released this month may be subjected to a revision during the next release of the jobs report. If revised upwards, the job market will progress further toward the pre-pandemic level.
QE tapering announcement likely to take place only in November.
As mentioned in my previous post, this jobs report is crucial in determining whether the Federal Reserve will announce a tapering during its meeting this month. It is without a doubt that the soft employment figure will hinder the progress towards the Fed’s maximum employment goal. Hence, it is likely that the central bank will be holding back any tapering announcements until more progress has been made in the jobs market. As of now, a tapering announcement in November is more likely going to happen than in September. This is provided that for the upcoming months, inflation continues to rise at a similar pace as in recent months and more importantly, jobs continue to be created at a rate close to July’s. That being said, an end-of-year announcement will likely prepare the Fed to kickstart QE tapering in early 2022.
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