Week in Review: September 3, 2021

Markets drifted higher over the course of the week, biding their time for the release of the August employment report. When it finally arrived on Friday, investors weren’t quite sure what to make of it. On a headline basis, the report was disappointing. The 235K new jobs added were well below both the consensus estimate of 750K and the low end estimate of 400K. However, beneath the surface there were some silver linings for the optimists. Wages increased 0.6% during the month, the previous two months were revised upwards by a collective 134K, and the household survey data, upon which the unemployment rate is calculated, showed 509K new jobs were added.

Investors also struggled to discern the report’s impact on monetary policy.  Prior to its release, it was widely assumed that a strong report would be enough for the Fed to formally announce its tapering plans at its upcoming September meeting. Now the question is whether or not the Fed will wait until its November meeting in order for officials to assess additional economic data to determine whether or not the August employment report was an aberration, or an indication that the current recovery is waning.

China’s manufacturing and services sectors contracted in August for the first time since early 2020. The slowdown was the result of the country’s strict efforts to limit the spread of the coronavirus, ongoing supply chain issues, and in the case of manufacturing, higher raw material costs. In true bad-news-is-good fashion, the slowdown raised the prospects of additional stimulus.