The greater availability of workers ushers in a key factor to tamping down the inflation pressures being generated from the jobs market without completely torpedoing demand. To that end, average hourly earnings growth eased slightly in August with a monthly increase of 0.3%. Nevertheless, earnings continue to advance at a pace inconsistent with the Fed's target even when accounting for trend-like productivity. But neither payrolls or these other indicators point to the jobs market being in any immediate peril. Job openings rebounded in July, small business hiring plans are steady and jobless claims have edged down the past few weeks. At 315K, August's increase in nonfarm payrolls continues to surpass the past expansion's monthly average of 190K. Moreover, the slowdown also may not look as sharp in a month or two. The first print for August payroll growth has the tendency to be revised up more than any other month. Over the past five years, the first release has undershot the third by 119K, compared to an average undershoot of 23K for all months.
With the Fed laser-focused on inflation, the August CPI will offer the last major piece of the 50 vs. 75 bps puzzle. But we don't see anything in the August employment report to alter the general path ahead: rate hikes are highly likely to extend beyond September and stay restrictive for a prolonged period. - Wells Fargo
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