Transcript of THE 162K AMBUSH: Why the 'Blowout' Jobs Report Hands Hawks Cover to Hike!
Wall Street Truthbombs
0:00162,0000:01jobs, that's nearly triple what Wall0:04Street was expecting and it's about to0:06cost you more in your mortgage, not0:08less. I can assure you that. By the end0:10of this video, you're going to0:11understand why the best jobs report in0:13months is actually bad news for anyone0:15renting, borrowing, or waiting on the0:17Fed to finally cut rates and why the0:19exact number everyone was celebrating on0:22Friday is the number the hawks needed to0:24justify what happens next. You better0:27pay attention. I was walking Eloise0:29yesterday morning and I saw a brand new0:32crossing guard directing traffic in a0:34vest that still had those folds, creases0:37from the packaging when my phone lit up0:39with the actual number when it came out0:41in the morning. It was 162,000.0:44I was like, "Whoa." Total nonfarm0:46payroll employment increased by 162,0000:49in August. That was not what economists0:51were expecting. They were expecting in0:53something like 56,000.0:55The unemployment rate held steady as0:57expected at 4.1%.1:00The financial media was calling it1:02immediately a blowout and on the real1:04print alone, it pretty much was one.1:07Let's get into it. I got a better look1:09when I went deeper into it and it looked1:12even better. June was revised up 11,0001:15jobs from 20,000 to 31,000. July was1:18revised up 44,000 from a negative 23,0001:22all the way to a positive 21,000.1:26Two months, two straight months1:28actually, of weak prints just got1:30rewritten into strength. Now, this1:33number arrived just two days after a1:36completely different signal from1:38Wednesday's ADP number, which showed1:41that just 38,000 jobs were added. It was1:44the weakest reading since January and1:46missed its own consensus of about, I1:48think it was like 47,000. Wall Street1:51spent 48 hours bracing for a soft Friday1:54number. It got the complete opposite.1:57This is exactly the kind of whiplash1:59that lets everybody exhale and call the2:02scare over. Except when you actually2:05open the hood on where those 162,0002:08jobs came from and look at what Wall2:10Street immediately did with the number2:13the second that it hit the tape. The2:15story actually flips completely.2:17If this were really the broad-based2:20healthy labor market Washington would2:22like you to believe, ask yourself why2:24two industries did almost two-thirds of2:27all the heavy lifting. Now, let's get2:30deeper into this, but before we do, if2:32you like this type of content, please2:34click like and don't forget to2:35subscribe. It's important to be in the2:36know. This is exactly how you do it.2:38Okay, let's start here. Food services2:41and drinking places added 59,000 jobs in2:44August. Local government education added2:4742,000 more. And those two categories2:50together, if you add them together, you2:52get 101,000 of the 162,000 headline2:56number. That's 62.3%2:59of the entire report. I did the math so3:01you don't have to. And it came from3:03restaurant staffing and public school3:04payrolls. Neither one is exactly the3:07leading edge of American productivity.3:09It's great stuff, but it's not the3:11productive stuff that we're always3:13looking for. Now, that crossing guard3:15that I saw yesterday morning is a3:18walking data point. Local government3:20education is one of the two engines3:22carrying this entire report. District3:25staffing back up is real hiring. It's3:28also not the private sector tech job or3:30the manufacturing job that tells you3:32that the broader economy is actually3:35accelerating. Now, let's zoom out and we3:38can see that the headline gets even3:41louder than it should. See, job growth3:44has averaged just 31,000 a month over3:46the trailing 12 months. This month's3:49162,000,3:51my friends, is more than five times that3:53trend. It's a number that, if you get a3:55number that far outside the recent3:58pattern, it's not automatically a new4:00normal. Sometimes it's a signal, so you4:02can't ignore it, and sometimes it's just4:04one hot month sitting on top of a4:06cooling trend. Now, the other two4:08low-wage sectors do most of the lifting4:11are exactly the kind of clue that tells4:12you which one that you're actually4:15looking at. Let's start with the shadow4:18data. You know I love the shadow data.4:20That's the one that put that nobody put4:23next to Friday's headline, of course.4:25The broader U6 measure, the U6 measure,4:28we talk about that a lot on Wall Street4:30Tooth Bombs. It measures unemployment4:33and it counts people who work part-time4:35who want full-time work and people who4:38have stopped actively looking. That4:40number sits at 7.7%.4:44Add the 7. the 7.0 million Americans4:47counted as as officially unemployed to4:49the 4.4 million working part-time4:52because they can't find full-time hours,4:55and you get more than 11.4 million4:57people either out of work or working5:00less than they really want to be on the5:03same day as a supposed blowout report.5:06Now, to be fair,5:08that part-time number actually improved5:10a little bit. It fell from 4.8 million5:13in July to 4.4 million in August. The5:15trend line moved in the right direction,5:17but over 11.4 million underutilized5:20workers is not what a headline that5:23reads smashed expectations is supposed5:26to sound like. And here's the part that5:28should really bother you. Certainly5:29bothers me. The same week payrolls5:32number blew past every estimate on Wall5:34Street, Challenger, Gray & Christmas5:37reported employers announced 52,8815:40job cuts in August. That is up 58% from5:44July. It's the sharpest month-over-month5:47jump in over a year. Companies are5:49adding workers in the aggregate headline5:51while simultaneously announcing the5:54fastest acceleration in layoffs in over5:56a year. That's not a labor market firing5:59on all cylinders, is it? No, that is a6:01labor market being reshuffled in real6:03time. Restaurants and school districts6:05hiring while other employers quietly6:07clear out the head count. Now, let's be6:10clear again here. Challenger's cuts are6:12still down roughly 38% from where they6:15stood a year ago. So, this is not a6:17layoff crisis by itself, but direction6:20matters as much as level with this6:22stuff. A 58% jump in 1 month is the6:25sharpest acceleration in over a year,6:28and it landed in the same week as a6:29headline everyone is treating as an all6:32clear signal. Even inside the report6:34itself, the reshuffling shows up. The6:37information industry, the actual6:38knowledge economy, data infrastructure,6:41publishing, tech services shed 23,0006:44jobs the same month restaurants and6:46school payrolls were adding tens of6:48thousands. And wages just handed the6:51hawks one more argument. Average hourly6:54earnings rose 3/10 of a percent in6:56August to $37.756:59an hour. That is up 3.1% over the past7:02year. That is not runway. It is also not7:05the kind of cooling number that makes a7:07central bank worried about jobs7:09comfortable cutting rates either. Stocks7:12didn't celebrate the strong print7:14either, you probably not surprised to7:15hear that. Major indices slipped in the7:18hours immediately after Friday's release7:20as traders priced in a less friendly7:22Fed. Proof that the desks on the side of7:25the screen understood the real story7:28well before it made it into anyone's7:30headline. And here's the actual ambush,7:32and it has nothing to do with the labor7:34market itself. It has to do with what7:36the Fed does with this number. Going7:40into Friday morning, CME FedWatch Tool7:42had the odds of a rate hike at the7:44September Fed meeting sitting around 497:47to 50%. That's basically a coin toss.7:50Within hours of Friday's report, those7:52odds jumped to roughly 60%. Fed chair7:55Kevin Warsh already teed this up at7:57Jackson Hole calling labor conditions8:00quite stable and consistent with full8:03employment and saying the Fed Fed's8:05predominant focus right now should be on8:07prices and not jobs. Following the8:09release, Warsh's own camp has told8:12markets to look through the payroll8:14number entirely and wait for next week's8:17inflation data instead. Translate that,8:20the jobs report is not a reason for8:22anyone to relax. It is ammunition for8:25the hawks who really wanted to raise8:27rate, not a reason to lower them. Every8:30time you hear somebody call the labor8:32market resilient this week, ask who8:34actually benefits from you believing8:37that statement. Now, here's what that8:39actually means for your money cuz that's8:41really what we're here to talk about,8:42right? The 10-year Treasury yield, the8:45benchmark, that's the benchmark that8:46prices most mortgages in the country, is8:49sitting near 4.78%8:51and it's edging uh higher, okay? That is8:54not the disinflationary path any hoping8:57for a cheaper mortgage was praying for.8:59The 30-year fixed mortgage is holding9:01around 6.78%9:03and that's edging higher towards 7%.9:06Nowhere close to the mid-4s that would9:08actually unstick this market right now.9:10Crude oil is trading near 90 bucks a9:12barrel again keeping a floor under the9:14price of literally everything that gets9:17trucked, shipped, or flown to a shelf9:19near you and me. Now, to be fair, Warsh9:22doesn't speak for the entire Fed by9:24himself. Governor Waller was arguing9:27just days earlier that the central bank9:29should lean toward holding rate steady9:32instead of hiking. Here's [snorts] a9:33real fight happening inside that9:35building and it was closer to a coin9:37flip before Friday's number than the9:39Hawks would like you to believe. What9:42this report did was tip the scale9:45toward, well, the Hawks. It didn't9:47settle the argument at right at all. So,9:50while restaurant staffing and government9:52payrolls did the heavy lifting on9:53Friday's headline, the real transmission9:55mechanism into your life runs through9:58from a stronger-than-expected number to10:00a Fed that now has fresher cover to hike10:03instead of cut. To a mortgage rate, a10:06car loan, and a credit card rate that10:10that all stay exactly where they are or10:13they climb from here. If you already own10:15the debt, a fixed mortgage, a fixed rate10:17loan, none of this really touches you10:19the from the other day. If you're the10:21one still shopping for rate,10:23refinancing, or carrying a balance that10:25floats with the prime rate, this is the10:26report that just made your light your10:28wait a lot longer. If you want to see10:31where this actually goes next, watch10:33three things now. Watch next week's CPI10:36report. Walsh himself has already10:38flagged it as the real decider. Watch10:41CME FedWatch's hike probability because10:43that's the market pricing this fight in10:46real time. And watch whether next10:48month's report keeps leading on the same10:50two low-wage sectors because that would10:53tell you this blowout was never as broad10:55as Friday's headline made it sound. That10:58crossing guard outside the school got11:00hired because the district needed the11:02staff. The Fed didn't need an excuse on11:05Friday. It got handed one anyway. So,11:09your truth bomb for today is this. A11:11jobs report that looked like relief on11:12Friday just handed the Fed's Hawks the11:15cover they wanted to hike instead of11:17cut. And the mortgage rate you're11:19waiting on is not coming down because of11:21it. It's staying right where it is or it11:24is climbing.11:25Join me every day for Wall Street Truth11:27Bombs where I drop them right here11:28before the market figures them out.
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