Instant view: August nonfarm payrolls rose by 96,000

September 7, 2012 Reuters

(Reuters) – Jobs growth slowed more than expected in August, setting the stage for the Federal Reserve to pump additional money into the sluggish economy next week and dealing a blow to President Obama as he seeks reelection in November.

COMMENTS:

ERIC STEIN, VICE PRESIDENT AND PORTFOLIO MANAGER, EATON VANCE INVESTMENT MANAGERS, BOSTON

“The weaker than expected job growth number caused U.S. Treasuries to rally across the curve. You can’t read anything positive into the drop in the unemployment rate because participation in the labor force also declined. This number all but guarantees the Fed will extend the low rate guidance at next week’s policy meeting, It also makes QE3 a lot more likely, but certainly not guaranteed at the next meeting as they may just do it later in the year.”

JOHN KILDUFF, PARTNER AT AGAIN CAPITAL LLC IN NEW YORK

“It was a decidedly negative report due to the meager number of jobs created in August and the downward revision for the two prior months.

“The reduced unemployment rate is likely more about increased despair among job seekers than increased hires. The employment picture further diminishes expectations for aggregate energy demand and gasoline, in particular, which looks to undercut the recent price rally in the very short-term.

“However, the data are clearly disappointing enough to allow for a third round of quantitative easing, which lends support to commodity prices and enable a run at $100 per barrel for (U.S.) crude.”

MATTHEW LIFSON, SENIOR TRADER, CAMBRIDGE MERCANTILE GROUP, PRINCETON, NEW JERSEY

“This is not a bad number because the unemployment rate went down and I think that’s what the Fed is more concerned about. So overall, I don’t think the Fed will do anything as a result of this number and could keep quantitative easing off the table for now.”

DEAN JUNKANS, CIO FOR WELLS FARGO ADVISORS AND WELLS FARGO PRIVATE BANK IN MINNEAPOLIS

“A little disappointing – 96,000. The market, given that ADP number, a lot of people were looking or hoping for 150,000. We had a 22,000 reduction on the revision for last month. We had a 15,000 drop in manufacturing payrolls – that is disappointing. The headliner is of course is unemployment down to 8.1 percent, but that is because 370,000 people left the workforce. Overall it’s a little bit on the disappointing side, not a disaster, by any means, but a little disappointing.

“It’s not bad enough to get immediate additional stimulus, it’s not good enough to take stimulus off the table and it’s probably not what people were excited for given that 201,000 print on the ADP (report).”

JACOB OUBINA, SENIOR U.S. ECONOMIST, RBC CAPITAL MARKETS, NEW YORK

“We were of the view that a payroll gain of around 100k with downward revisions would put QE3 firmly in play and that is what we got. The report overall is weak across the board. The decline in the unemployment rate was due to the decline in the labor force while earnings flat-lined. Presidential candidate Mitt Romney will have more talking points from this than Obama. Even more surprising was the optimism leading into this report after all the other data this week, such as the ADP report.”

DAVID SLOAN, ECONOMIST, 4CAST LTD, NEW YORK:

“A disappointing report and it seems like the July numbers were probably inflated by a few temporary factors. Manufacturing in particular corrected down and the auto industry didn’t shut down as is normal in July, so that flattened the numbers in July and in August we have had a pause back. It is certainly disappointing with downward revisions to July and June. The jobless rate is the one bright spot, but the jobless rate seems to have come down on a fall in the labor force rather than a rise in employment.

“It is probably weak enough to have the Fed thinking about more QE. The Fed is less likely to react to surprises in the market, but this is certainly a disappointing report and increases the odds for QE, which were already reasonably high.”

JOSEPH TREVISANI, CHIEF MARKET STRATEGIST, WORLDWIDE MARKETS, WOODCLIFF LAKE, NEW JERSEY

“This weak employment report, in jobs, wages, hours worked and participation is probably the last piece the Fed needs before launching another round of quantitative easing next week. QE will boost equities, damage the dollar and do little for the economy, but what else can an activist Fed do? ”

MARKET REACTION:

STOCKS: U.S. stock index futures pared their gains

BONDS: U.S. Treasury debt prices turned positive, reversing sharp early losses.

FOREX: The dollar extended its losses versus the euro.

(Americas Economics and Markets Desk; +1-646 223-6300)