00:00It is a disappointment, a kind of a surprise here that may throw some confusion into what's
00:05going on with the Fed. Negative 23,000 jobs. There have been people who've been forecasting
00:10that that might happen sometime soon. Ian Lingen over at BMO turns out to be right today. The
00:15unemployment rate, though, drops to 4.1 percent, and I imagine what we're seeing there is another
00:20decline in the labor force. We'll take a look at that in just a second. Change in private payrolls,
00:2530,000. And also the two-month net revision, 103,000 taken away. So what we're looking at is
00:31a labor market that is much weaker, at least on the hiring side. The change in private payrolls,
00:37as I mentioned, 30,000. Change in manufacturing, 5,000. Average hourly earnings up only a tenth of
00:44a percent, so no inflation pressure there. Puts the year-over-year rate at 3.2 percent. Hours worked
00:50at 34.3. That's the same as it was in June. And the underemployment rate, 7.9 percent. The labor
00:59force participation rate does tick down to 61.4 percent from 61.5. So I'll take a look at the
01:06underlying numbers and get back to you in just a second. Mike, thank you, buddy. You can guess
01:10what's happening in financial markets. Let's just start with the headline. There's a lot to figure out
01:14here, but for the headline, negative 23,000. The low estimate in our survey was 40, positive. The
01:20median was 80. That's a big downside surprise. So in the bond market, let's start there.
01:25Twos, tens and thirties. You look across the yield curve, you'll notice yields dropping quite
01:30aggressively at the front end of the curve as people reduce at least near-term expectations
01:34for Fed action with twos back down to, let's call it 4.16. In response to that, equities pick up
01:39on the S&P, on the Nasdaq, the Russell, with some outperformance around the small caps off the
01:44back of this up by three quarters of one percent. Lisa, just to work through the data and Michael
01:48get to the details, it's a downside surprise on the headline number. You've got that quirk
01:53in the participation rate again. So you've got unemployment falling back from 4.2 to 4.1.
01:58We were looking for that to remain steady and unchanged at 4.2 percent. And then wages coming
02:03in softer than expected. Make sense of this puzzle this morning, if you can.
02:07No, thanks. I mean, I think that I think that the only way that some people will try to explain
02:11this first, I think that there will be a cohort of people who say it's a random number generator,
02:15because ultimately it says more about the overarching dynamics of the input of available
02:21workers versus the demand on one side. To me, the thing that sticks out is 4.1 percent unemployment
02:27unemployment rate that it ticked down to the lowest level going back to June of 2025. And it raises
02:33this question. Is it just that people are dropping out of the force? Well, it looks like actually
02:37the number of underemployed went down or at least the percentage. So this, to me, looks kind of like
02:43the productivity report yesterday, which speaks to a robust market that is not inflationary. Again,
02:49this goes to this question of are we seeing what people are hoping for, which is increased
02:54productivity, more disinflation, but a solid economy. We're in the process of digesting this data.
03:00This is the first move. We always say it's not necessarily the right move. A bit into the front
03:05end of the curve, a bit into bonds across the curve, but you see the bigger move at the front
03:08end,
03:09just dropping by seven basis points on twos. Equities responding positively to this as well.
03:14Mike, there's an obvious question. When you look at data like that, whether it's the headline read,
03:18what it's happening with unemployment, am I seeing the consequences of a supply story or a demand story
03:24or both, Mike? What do you see in the data? Well, I hate to say this. I hate to use
03:28this word because
03:29everybody hates it, but seasonals. There was a decline of 50,000 jobs in local government education
03:37in July. Usually those people would tend to fall off the payrolls in May or June. And so I think
03:44what we are seeing here is a sort of a distortion in the overall numbers. If you add that 50
03:49,000 in,
03:50it would be a low 20,000 jobs or so created, but much better than what it looks like now.
03:57And when you look at the underlying categories, what you're seeing is slower job growth. So
04:02you're taking away probably from the demand side. The construction jobs were up 22,000,
04:09which you'd expect given the way construction is going these days, but a low hire in manufacturing
04:16and a whole loss of jobs, 19,000 in the retail business. And then in terms of leisure and hospitality,
04:2440,000 jobs lost after 43,000 jobs lost in June. And we don't know exactly, but that may have
04:31a lot
04:31to do with the timing of the World Cup and people who were hired earlier in April and May to
04:37work
04:38on that. So it's not as bad on the top line as it appears, but it isn't great news either
04:46way.
04:46All right.
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