The anticipated job report that came out on Friday, 3 September 2021, was weaker than expected.

Nonfarm payrolls increased 235,000 last month, standing as the smallest gain in 7 months. This reading was way below the analysts’ expectations of 725,000 jobs for August, after surging more than 1 million in July.  

Leisure and hospitality – which has posted strong gains in the past – was flat due to the spreading of the Delta variant, and hiring constraints. 

The unemployment rate fell to 5.2% from 5.4% 

In August 2021, 5.6 million people reported that they were unable to work because of the pandemic. This up from 5.2 million a month earlier, the Labor Department said. 

U.S. payrolls are still 5.3 million below their pre-pandemic level. 

The participation rate — the share of Americans who are employed or looking for work — was unchanged last month, at 61.7%. 

Here are the closing levels on Friday: – 

	Last	Change	%Change
Dow Jones	35,369.09	-74.73	-0.21%
S&P 500	4,535.43	-1.52	-0.03%
Nasdaq Comp	15363.52	+32.34	+0.21%
US 10Y	1.3126
VIX	16.41	0	– 0%

The reaction of the market to the numbers suggests that while the headline number was weak, it is not time to panic. 

Maybe it is a one-off, and we might see it return to its uptrend next month, and the months to follow. 

Additionally, if it is a slowing down, then the Fed might delay its tapering, and continue to prop up the markets with its easy money. 

Remember volumes were low due to the long weekend Labour Day Holiday on Monday. 

It is hard to read too much into the moves with light volumes. 

Articles show that in the run-up to the jobs report, equity funds attracted $19.2 billion of inflows, trailed by the $12.7 billion allocated to bonds. This is according to Bank of America Corp. The firm cited EPFR Global data for the week through Wednesday. Outflows from cash funds were the biggest in seven weeks, with $23 billion exiting. 

One last piece of interesting news is that the White House unveiled a $65 billion plan to prepare for new pandemic threats. The plan focuses on protecting the U.S. against potentially catastrophic biological threats, including those that are naturally occurring, accidental, or deliberately set in motion by bad actors. 

Source: CBOE, Reuters, Bloomberg

This commentary was written by James Gomes
James has been in the finance industry for over 30 years and most recently worked for a large US bank for more than 20 years.

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