Why you shouldn’t give much weight to the August jobs report

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First, we shouldn’t put too much weight on the weak August numbers. As my colleague Rick Rieder pointed out in a recent post, August’s modest print was mostly a reflection of seasonal weakness and is likely to be revised higher. In addition, while the labor market still faces structural headwinds, average monthly non-farm payroll gains are above the 200k level, consistent with a decent economic expansion.

august upward revisions

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Market Realist – The previous graph shows how August historically tends to see upward revisions in the jobs growth data. According to Rick Rieder, out of the last 18 August payroll reports, 14 have failed to meet expectations due to slow hiring in the summer. But at the same time, we’ve seen an upward revision in 12 of the last 14 August employment releases.

In response to the jobs report, markets remained relatively flat in the week ended September 5, 2014. The S&P 500 (SPY) increased by 0.20% to 2,007. The Dow Jones Industrial Average (DIA) too saw a rise of 0.23% to 17,137, whereas the NASDAQ (QQQ) rose by 0.04% to 4,582.

In the week of the release, consumer staples (XLP) and utilities (XLU) led the recovery in the markets. Both climbed up by 0.8%. Energy (XLE) posted a weekly loss of 1.5%.

Read on to the next part of this series to learn why other indicators are pointing to a recovering U.S. economy.

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