I suspect, like many others you are bewildered by the August Employment Situation Report, released by the Bureau of Labor Statistics on Friday last, just in time for the long Labor Day weekend. The hedge fund set I am certain has spent the last three days pondering what the report portends for a shift in Federal Reserve policy.
Will they? Or, Won’t they? Raise the Federal Funds rate in the coming weeks?
Well I have bad news for any and all who believe the answer is in the employment numbers. At this juncture, the forces compelling the Fed to reverse course have a twisted logic that a bad employment report may be incapable to deter.
My view: the August report was poor. Inclement weather for a change is not the culprit. And, I do not expect a significant upward revision.
My reasoning is based on the seasonal patterns in employment in public education. If I am correct, a portion of the job gain may thus prove illusory when the September report is compiled. Because of a late Labor Day holiday, many school districts across the country have resumed classes two weeks or more earlier in the season. Thus, some of the August rise may reflect the recall of temporary and seasonal workers, who in other years with an earlier Labor Day weekend, would have first reported back to work in September.
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