“Labor Day”

Rates rise despite signs of a weaker labor market. Swap rates and Treasury yields rose across a steepening curve, overcoming a morning rally spurred by NFP and unemployment data. Rates closed 10bps+ higher from their session lows, the 2-year UST yield ending little changed at 4.88% and the 10-year now at 4.18%. Strong ISM manufacturing and hawkish comments from Fed President Mester drove the move higher.

The labor market. Today’s data illustrated a looser labor market, as July NFP was revised downward by 30k to 157k and the unemployment rate spiked to 3.8%. The unemployment rate is particularly noteworthy, a significant jump from 3.5% in July and the highest since February 2022. Average hourly earnings also indicated a weaker labor market, the MoM level at 0.2% from 0.4% in July. Meanwhile, August NFP surprised to the upside, coming in at 187k despite the forecast of 170k.

Week ahead. Economic optimism, factory orders, and ISM PMI figures will highlight the week. The Fed Beige Book, a summary of current economic conditions, will be released on Wednesday. Markets will be closed on Monday in observance of Labor Day. Enjoy the long weekend!