Stocks Are Mixed After Weak Jobs News
U.S. stocks were mixed on Friday, after the August jobs report came in much weaker than expected.
The U.S. added 235,000 jobs in August, compared with a revised increase of 1.053 million in July. Economists expected an increase of 720,000 jobs in August. The unemployment rate fell to 5.2%.
Dow Jones Industrial Average
closed 75 points, or 0.2%, lower while the
finished down less than 0.1% and the
closed up 0.2%. All three indexes were up in the morning before the jobs report was released.
In the payrolls report, the leisure and hospitality industry—the most sensitive to Covid-19—added no jobs. Investors had wanted to see that the Delta variant was not restraining domestic economic growth.
The number of people that could not work full hours because their employer was not fully opened due to the pandemic rose in August.
Still, some employers may have had a difficult time hiring, as average hourly wages rose for the month. One of the market’s biggest fears recently is that wage inflation, which could incentivize companies to raise prices, will create consumer price inflation, which could lower economic growth.
The main driver of the employment weakness may have been labor shortages. Wages in leisure and hospitality rose 1.4% month-over-month, according to Citigroup economists. This signifies that those business are trying to hire in order to meet strong demand. “We see the weak headline jobs number as representing more issues with worker-shortages than a lack of demand,” writes Andrew Hollenhorst, Citigroup economist.
There were some positives to be found in the report, though. If some are not returning to work as they enjoy unemployment benefits, which soon expire, jobs could soon return at a faster pace. Plus, with rising Covid-19 cases responsible for some of the employment weakness, “it’s a transitory report,” says Brent Schutte, chief investment strategist at Northwestern Mutual Wealth. “As Delta hopefully rolls over, as booster shots come out, that alleviates that fear [Delta].”
Also, perhaps a weak jobs report—transitory or not—will delay the Federal Reserve’s plan to reduce its monthly bond purchases. “Friday’s weaker-than-expected jobs puts less pressure on the Fed to taper its stimulus,” writes Jay Pestrichelli, CEO of ZEGA Financial.
Chinese equities felt a pinch after weak economic data from the August services purchasing managers’ index (PMI) came in at 46.7, below the 52 expected and a decline from 54.9 in July. The
slipped 0.4% and the Hong Kong
Hang Seng Index
Japanese stocks far outperformed their Asian peers after Prime Minister Yoshihide Suga—whose government has come under fire for its handling of the pandemic—said he would resign ahead of national elections this year. Tokyo’s
index rose 2.05%.
European investors observed poorer-than-expected data, with the Markit composite and services PMIs for the Eurozone both falling slightly short of expectations and marking declines from July—potentially signaling that growth is slowing.
(ticker: PD) stock rose 7% after reporting a loss of 13 cents a share, better than the estimated 15 cents a share, on sales of $67.5 million, above expectations of $65.6 million.
(DOCU) stock rose 5.3% after reporting a profit of 47 cents, beating estimates of 40 cents a share, on sales of $511 million, above expectations for $487 million.
(YEXT) stock fell 6.3% after reporting a loss of 6 cents a share, better than the expected loss of 7 cents a share, on sales of $98 million, above expectations for $95 million.
(AVGO) stock rose 1.2% after reporting a profit of $6.96 a share, beating estimates of $6.88 a share, on sales of $6.78 billion, above expectations for $6.76 billion.
(MDB) stock gained 26.3% after Stifel raised its price target to $495 from $384.
Write to Jacob Sonenshine at [email protected]