Halyard’s Weekly Wrap – 10/08/21

At first glance the September unemployment report released on Friday looked wildly disappointing. It’s been described as “Disastrous” at several media outlets. Consensus was looking for 500,000 newly created jobs for the month, and to be honest, we would have taken the over on that bet. Instead the BLS reported that the economy generated 194,000 jobs for the period. We’re hesitant to call that disastrous. Disastrous would have been a loss of aggregate jobs for the period. After digging into the report we found several truly bright spots. First, the previous two reports were revised higher for a total of 169,000 workers. Second, the Household measure of new jobs created totaled 526,000. The household and the establishment survey quite often tell a different story and that’s clearly the case this month. Effectively, the establishment survey is better at smoothing the month-to-month variation, the desirability of which is an argument that is beyond this scope of this snippet. Nonetheless, In our opinion the magnitude of the difference is material and we give greater credence to the 526,000 reported by the household survey. Third, the unemployment rate shrunk from 5.2% to 4.8%, and average hourly earnings rose 0.6% month-over-month, both decidedly positive. That all brings us to the question of “is it enough for Powell to justify tapering in November?” We think that’s absolutely a yes!

Also of note this week was Senator Mitch McConnell’s acquiescence to vote in favor of raising the debt ceiling immediately; instead favoring a two month extension to December. We’ve written on many occasions that there are times when market liquidity dries up and market volatility becomes magnified and December is absolutely that time. Equities rallied on the news and have been able to hold that bid into the weekly close, which is somewhat counterintuitive. We’re now less than two months from another debt limit battle and all of the “hand-wringing” and partisan fighting that goes with it.