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How investors read the August jobs report as US stocks close at their lowest since July

Stock market gains following a healthy rise in US employment in August gave way to losses on Friday as the three major indices closed at their lowest levels since late July. before raising the base rate at its next September meeting.

U.S. stocks fell for a third straight week on Friday after Russia’s Gazprom said it would postpone the reopening of its Nordstream pipeline to Europe.Dow Jones Industrial Average DJIA,
-1.07%
It finished 337.98 points (1.1%) lower at 31,318.44 after a session high of 370 points. NASDAQ Composite COMP,
-1.31%
154.26, or 1.3% down to finish at 11,630.86, the longest losing streak in three years. S&P 500 SPX,
-1.07%
It finished at 3,924.26 with 42.59 points, or 1.1% off.

The economy added 315,000 new jobs in August, the Labor Department said on Friday. This is broadly in line with estimates of 318,000 jobs from a Wall Street Journal survey of economists, well below July’s increase of 526,000.

“Today’s employment numbers look like they’re right in the middle,” said Melissa Brown, head of global research at investment manager Quantigo. “In that sense, I think it’s good news, not bad news. .”

look: The job market is still on fire with this move — so don’t expect the Fed to back off

Meanwhile, the unemployment rate rose from 3.5% to 3.7%, mainly due to rising labor force participation. This is the highest unemployment rate in half a year.

“(Non-farm payrolls) are down from July, but we’re not too worried,” said Liz Young, head of investment strategy at SoFi. I think that has joined the workforce, labor force participation has been below pre-pandemic levels for a long time, and in terms of percentages it’s still slightly below pre-pandemic levels, but now the number of workers are above pre-pandemic levels, which is a very welcome sign.”

Federal Reserve Chairman Jerome Powell said in a speech in Jackson Hole last Friday that the central bank would continue the fight to return annual inflation to its 2% target “until the job is done.” and companies.

Investors will look to the August jobs report for more clues as to how much and for how long the Fed will raise rates. But there are no signs the central bank will back out of tightening policy as investors are simply “grabbing straws and trying to find something cool in this report,” Young said.

“There are concerns that the labor market is overheating, and if it continues, they (the Fed) will continue down this hiking path. It will change until inflation really goes down or the labor market shows signs of real weakness. They are true signs of cooling.”

look: Trading on the ‘Goldilocks’ jobs report can be risky as the S&P 500 encounters stiff technical resistance

The government reported on Thursday that the number of people who filed for unemployment benefits at the end of August fell to a nine-week low of 232,000, showing no signs that a slowing U.S. economy is causing widespread layoffs. Hmm.

At least one economist predicts the US is headed for a “tremendous” recession next year as inflation remains high through 2024. about recession.

“We’ve never had a recession with a strong labor market,” said Young. “I think the market is taking this as a signal that a recession is not imminent, and that’s not what he fears in the next quarter or two.”

Trading on other financial markets has been choppy since the release of the data. Yields on 10- and 30-year government bonds fell on Friday. Yield on 2-year US Treasury Note TMUBMUSD02Y,
3.401%
It fell to 3.398% after hitting a 15-year high on Thursday. 10 year government bond yield TMUBMUSD10Y,
3.198%
3.190%, down from 3.264% on Thursday afternoon.

Gold price for December delivery GC00,
+0.78%

GCZ22,
+0.78%
It rose $13.30, or 0.8%, and settled at $1,722.60 per ounce on Comex. ICE USD Index DXY,
-0.07%,
A measure of dollar strength against a basket of rival currencies fell 0.1%. That’s because higher bond yields pushed the US dollar to a multi-decade high a day before he did.

The S&P 500 is down 3.3% this week, the Dow is down 3% and the Nasdaq is down 5.8%, according to Dow Jones Market Data.

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